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

Important Information

Unless otherwise stated, all information contained in this document is from Amundi Asset Management US (Amundi US) and is as of April 12, 2022. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi US and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results. Amundi Asset Management US is the US business of the Amundi Asset Management group of companies.

Other news

04/23/2024 Investment Talks

Remain agile in bond selection, with an eye on last mile inflation

Though the US economy and consumers appear to have largely defied the "gravitational pull" of significantly tighter monetary policy, we continue to view the risk of a recession during 2024 as higher than normal. We expect that such a recessionary scenario would lead to significantly greater interest rate cuts, while the "no landing" scenario of more persistent inflation would delay the start of rate cuts. As developed economy central banks continue to grapple with when to start normalizing local monetary policy, now could be an interesting time for investors to strengthen their portfolios by extending the duration of their fixed income portfolios and raising credit quality and liquidity profiles while carefully weighing global opportunities.

04/17/2024 Investment Talks

US High Yield Market Outlook and Positioning

Although first-quarter returns proved to be anemic, at least they were consistent. Across the quarter, monthly returns were positive and spreads moved tighter. With inflation's decline stalling, short-term rate expectations stabilized. Within high yield, Treasury yield increases largely negated the effects of tighter spreads, leading to returns near the index's coupon yield. Although CCCs were the best performers in the US and globally, the US High Yield Distressed Index (comprised of issuers with spreads over 1000 basis points) underperformed the broader US high yield market, indicating investors were more interested in high-yielding bonds than in potential workouts.

04/05/2024 Investment Talks

Bonds Take Center Stage

For most of the last year, savers have been earning a reasonable return in cash. But how long can these compelling cash rates last? Historically, the answer has been: not very long. In every rate hike cycle since the 1970s, the US Federal Reserve has “paused at the peak” federal funds rate for a matter of months, not years, and history suggests the rate cuts could begin soon. With history as a guide, we believe investors may benefit from locking in some of today’s historically elevated interest rates by moving out of cash and into short-term bonds.

See more news