Photo © Carmignac

Par Frédéric Leroux, member of the Strategic Investment Committee

E. Macron’s clear victory is likely to reassure the markets that the European dynamic will continue. In the short term, the main logical beneficiary of this election could be the euro, which was still flirting last Friday with two-year lows against the dollar. As the European equity market has rather outperformed the US market in the last few days, there is not necessarily a reason to expect a massive outperformance of French or European equities against the US. The negative aspect for the markets of this rather comfortable election could however come from a quick decision in favour of a Russian oil embargo which would exacerbate inflationary pressures and economic slowdown (stagflation scenario) in Europe.

But the real issues are not immediate. Is the outcome of this election clear enough to anticipate that the June parliamentary elections will give the President a majority that will allow him to implement his pro-business and pro-European policies desired by the markets? It seems dangerous at this stage to take it for granted. In the longer term, regardless of the geography of power, the main constraint on economic policies will be sustained inflation. It is not at all clear that the economic programs on which the president and deputies are being elected have been built on this reality, which is becoming more and more evident. And France is no exception in this respect.

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