Macron re-elected in France: the reactions of wealth managers

Wealth management industry figures appeared largely relieved yesterday as weekend polling results in France showed President Emmanuel Macron had returned to the Elysee Palace with a comfortable majority – the first president of France to be re-elected for two decades. His term of office is five years.

Voters in France, the world’s seventh-largest economy, reelected President Emmanuel Macron to a new term over the weekend, beating far-right challenger Marine Le Pen. His victory is seen as an endorsement of a centrist candidate who is very attached to the importance of the European Union.

With 97% of the votes counted yesterday morning, Macron was on track to win nearly 58% of the vote (Reuters, April 25, others), a margin wide enough to remove doubts about the result. The term of office is five years.

“The result was widely expected, but the residual uncertainty has now been lifted, which should, at the margin, support French and European assets, as well as the single currency,” said Dean Turner, chief eurozone economist. and the UK at UBS Global Wealth Management. Chief Investment Office, said in a note yesterday.

“The reform of the eurozone fiscal rules, with the Stability and Growth Pact due to return later this year (although there is a good chance it will be delayed again), will be a major challenge. With Macron’s backing, the reform should foster a more gradual path to fiscal consolidation that, all else equal, would be supportive of growth and investment, particularly in areas such as decarbonization and digital technologies. said Turner. (He referred to eurozone rules on debt, the size of deficits as a percentage of GDP, which have sometimes been criticized for being unduly restrictive on what countries can do to boost economic growth since the inception of the eurozone. euro more than 20 years ago. )

Reports noted that Le Pen’s far-right party secured nearly a third of voters in the first round of the electoral process, which is unprecedented in the history of the Fifth Republic.

A number of comments on the result said voters chose Macron more as a least-worst choice than because they were enthusiastic about him. Sharp rises in the cost of living – as endured around the world – frustration over issues such as handling the pandemic, as well as concerns over the integration of immigrants, have played the game challenger parties.

“Financial markets will breathe a collective sigh of relief after Macron’s election victory. On the one hand, as the gap between the two candidates in the opinion polls widened last week, a victory for Macron looked pretty well priced. On the other hand, the accuracy – or lack thereof – of political polls in recent years meant that investors were always going to be a little nervous,” said Seema Shah, chief strategist at Principal Global Investors. “Even if, compared to the alternative, this result is good news for the euro, French bond spreads and French bank share prices; it’s hard to see much upside for these short-term assets given the broader macroeconomic outlook following the war in Ukraine. We think the likelihood of Europe ending this year in recession is high – and Macron’s victory doesn’t change that.

“Macron becomes the first French president to be re-elected in two decades. It was a narrower margin of victory than 2017’s 32 points, with the soaring cost of living worrying voters, but a significant relief after the tightening polls in recent months,” said Ben Laidler, global market strategist at social investment network eToro.

“Attention will quickly turn to the ‘third round’ represented by the June legislative elections which will determine Macron’s ability to successfully implement his policies during his new five-year term,” Laidler said.

France has one of the largest shares of the state in GDP in the developed world, with the state absorbing more than 62% of GDP in 2020 (Trading Economics) – a situation accentuated by the pandemic. Macron faces a battle to try to prevent that spending from stifling economic growth.


 

Dolores W. Simon