French Election: Markets Complacent for Macron Victory, but Game is Not Yet Won

Tuesday 12 April 2022

Investment Talks


French Election: Markets Complacent for Macron Victory, but Game is Not Yet Won

April 12, 2022 | President Macron is leading in the polls, but an upset victory by Le Pen would significantly change policy in France. Markets are currently complacent in anticipation of a Macron victory, but a tightening race will command some degree of market volatility in the coming weeks, adding to a complex landscape in Europe.  The prospect of a European recession is another key issue, and our tactical view is that  US equities are in better shape than  European ones. This has nothing to do with the French election, but with the broader macroeconomic and geopolitical situation, as Europe has been hardest hit by the conflict in Ukraine.

01 | In the French presidential election, early polls are projecting a narrow Macron victory at  51-55%  of  votes  in  the  second  round.  Pundits estimate a Le Pen victory at 30%, which is not negligible and is likely to trigger some volatility in the coming weeks.

02 | The  French election  has caused  very  little market reaction,  as  the  result  was  already  largely  priced  in.  The  eurozone economy is still in worse shape compared to that of the US, but this is mostly due to the ongoing conflict in Ukraine.

03 | We  remain  cautious  about  European  equities,  favoring  high-quality US names and the value sector. Now is not the time to add more risk to portfolios, but  to  play  rotations  within  markets  and  to  implement  short-term  hedging  against volatility.

Inv Talks - First Round France Election

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