Monday Market Musings>>> The French Elections; If the Roles Were Reversed
Picture Credit: LesEco.ma
French voters are expected to give another five years to Emmanuel Macron. On Sunday, Macron won 59% of the vote, over far-right candidate Marine Le Pen, making him the first French President in two decades to be elected for a second term. The lead up to the election had been proven quite stressful for Investors, since a surprise victory for Le Pen was believed to possibly rattle Europe’s second biggest economy.
What would have happened if Le Pen had won? How would it have affected the market?
Le Pen’s hypothetical victory would have immediately caused many to question France’s ties (both political and economic) with the EU. Most of her policies would not have been in harmony with the laws of the EU, possible leading to a “Frexit” or French exit. This would’ve been a heavy blow to France’s economy, as many investors would’ve pulled cash from the country, making way to a considerable abatement in capital. It would be a situation similar to that of the Brexit, the effects of Brexit lasted for a considerably long time for the UK, with the British pound still not recovered after it crashed. It would most certainly send a jolt through financial markets.
“It would be a terrible day for markets,” said Ariane Hayate, fund manager at Edmond de Rothschild Asset Management in Paris. “The first impact would be on the French 10-year bond yield that could go through the roof.”
According to analysts, Le Pen’s anti-immigration mindset could hurt industry’s suffering from lack of labour. The Construction and hospitality industries would be the first to feel the reduction of immigrants.
Amid all the fuss, a fear of recession has arisen. Energy prices have hitched due to the invasion of Ukraine by Russia, increasing 29% since 2021. Prices of food items have also increased since 2021. According to studies, around 40% of the population in France earn less than $1,736 monthly. Inflation had hit 4.5% in March, the lowest in a year.
Picture Credit: The Washington Post website
Macron’s victory could possibly offer another five years of political stability for the EU, catching a break from years of arduous situations (Brexit, an immigration crisis, as well as the ongoing war). Ursula von der Leyen, the European Commission President was among the first world leaders to congratulate Macron, along with German Chancellor Olaf Scholz. https://twitter.com/vonderleyen/status/1518292235632132101
With Emmanuel Macron’s win on Sunday, investors have reason to breathe easily. Matteo Brancolini, a fund manager at BPER Banca SpA in Milan, had stated; “A Le Pen victory would destroy the beating heart of Europe.” “A crumbling European Union could in turn lead to a meltdown on markets.”
April 25th 2022 | 9:00 PM