No Surprises in France
Posted May 15, 2017
By now, you’ve almost certainly heard that the French people overwhelmingly elected a centrist candidate named Emmanuel Macron as the country’s youngest-ever President. Some had been predicting a Brexit-like, Trump-like upset for losing candidate Marine Le Pen, but the parallels extended only to the fact that Le Pen stood for some of the same things: exiting the European Union and halting the flow of Middle Eastern immigration. Like the Dutch earlier this year, the French rejected a nationalist approach to government, preferring a candidate who appears determined to reconcile France’s political left and right. The final vote was a landslide: 66.06% for Macron to 33.94% for Le Pen.
What effect will the election have on us in America? The election served as a referendum on whether the French wanted to remain within the European Union. Their response is good news for investors overall, since a “Frexit” would have almost certainly led to the demise of the EU and a greater degree of global uncertainty. It is also welcome news for the French business community. Macron served as France’s economic minister before he left Francois Holland’s socialist party to form his new party; he is expected to make strengthening his country’s corporate health a first priority. Among his campaign promises: to ease labor laws and give new protections to the self-employed, while reducing public spending and limiting public sector jobs. All of this could be beneficial for anyone invested in European stocks.
The larger question for political observers is whether the French election is a harbinger of future political shifts elsewhere around the globe. The French people, according to exit polls, were tired of the usual choices between a hard-right and hard-left candidate, and wanted to chart a course that people on both sides could agree on. That may not be possible, but it could mean that future candidates around the world will at least have to try to appeal to their country as a whole. It is also notable that Macron promised during his campaign to stand up to Russian President Vladimir Putin, while his opponent was receiving campaign loans from the Russian state.
The victory celebration will be brief, since the French will be holding legislative elections in June. Those results will determine whether the new President will be able to pass his agenda or face legislative gridlock. A full assessment of the French political impact on portfolios will have to wait another month.
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