My instinct is that if he was still alive Charles de Gaulle would not be impressed by the French Presidential race of 2017 and would probably think he could sweep the field if he ran himself.
‘I have tried to lift France out of the mud. But she will return to her errors and vomitings. I cannot prevent the French from being French’ – Charles de Gaulle
Nevertheless Sunday is the first round of the election to find the successor to the hapless Francois Hollande who could not even find it within himself to run again due to his gross unpopularity.
This election is pivotal for many reasons.
The choice of the new incumbent of the Elysees Palace will have a huge impact on the future of Europe economically and politically.
In short if you are an investor – or worry about the value of your pension fund – then it is time to pay attention to the news from Paris on Sunday when the composition of the final second round French Presidential head-to-head is established.
We know how warped opinion polls have been recently so the current indications of a close four-way first round vote is extremely noteworthy, especially as two of the candidates could be described as ‘mainstream’ whilst two are more ‘populist’.
Let’s take a quick look at the runners and riders.
In the more mainstream corner we have the current poll leader Emmanuel Macron, a youthful ex investment banker whose vigour reminds me of an emerging Tony Blair twenty odd years ago.
Remember though how the latter was referred to as Tony Blur for a while because of the lack of clarity in many of his policies?
Well that’s Macron in short: polite, decent, youthful, but decidedly centrist. He is your middle-of-the-road choice.
You cannot say that about the other more mainstream candidate Francois Fillon, the right-of-centre candidate, who has been described as France’s answer to Margaret Thatcher in his proclamation for economic reform.
The trouble is his message of the need for mainstream change has been drowned out by a scandal involving his wife being employed in his political office for little other than some tax benefits. He is on an attempted comeback trail after six months ago being the front runner.
In the more populist corner we have Marine Le Pen whose efforts to broaden the appeal of the National Front party has taken her consistently higher up the polls than her Father who once made the second round the French Presidential election only to be soundly beaten.
Anti-Europe and anti-euro and with firm views on immigration and nationalism she is hoping dis-satisfaction with France today by the French will propel her campaign to success.
And finally there is Jean-Luc Melanchon who as a Jeremy Corbyn style man of the left has been like a horse coming up on the rails with improving polling as the race reaches a crescendo, with his soak the rich and enhance the role of the state for the average worker message.
You do not need to be a dyed-in-the-wool economic and political analyst to know what options the financial markets would prefer shorter-term with Macron and Fillon standing for acceptable change whilst Le Pen and Melanchon representing a potentially more aggressive ripping up of the rulebook – even if they would have to work with a sceptical Parliament to push through some of their more radical changes such as France’s continued participation in the euro or the expansion of the taxation base.
And with each of the four candidates either side of 20% popular support in recent polls AND up to a third of French voters currently undecided then it is officially anyone’s guess as to what Sunday’s results will show from the market’s favourite of Macron versus Fillon to the Le Pen versus Melanchon option which would send European financial and currency markets into a bout of sharp volatility.
We could draw a line here and conclude it is all up in the air. But this is a column and you want an investment view. My continuing thought (as originally published here) remains that populists are not going to crash and burn global markets in 2017.
Critically the French economy has started to turn in recent months and as Europe today celebrates its highest purchasing managers index data for six years and best job growth for a decade (admittedly from very easy comparisons) there will be enough retained faith in the current status quo for at least one of the more mainstream candidates (probably Macron) to enter the second round…and win.
We quoted de Gaulle earlier about French failings but at least in 2017 the mainstream will still win out, giving another reason for the still poorly perceived euro to rise further and augmenting the justification for European stock markets to perform better during the year than their American cousin for once.
That will be enough for 2017.
Looking ahead challenges remain though with even a mainstream candidate having to stand for change and evolution to push a reluctant France to play its full and proper role with a broader European Union to become more dynamic.
But short-term, initially in Sunday’s vote and ultimately in the second round vote two weeks later the mainstream will again win out. And your pension fund value will be thankful.
Chris Bailey has over 20 years of investment industry experience at long-only and long-short institutions as a global multi-asset fund manager, strategist/macro thinker and, in the earlier part of his career, as a securities and fund analyst.
In 2013 he founded Financial Orbit focusing on daily macroeconomic comment and securities analysis. In December 2016 his Twitter account (@financial_orbit) was named as one of the ’50 accounts investors should follow in 2017’.
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