Can A Macron Victory Lead To An Upswing In European Stocks?

equities

Emmanuel Macron won the run-off contest this past weekend over Marine Le Pen and will become the next president of France this upcoming weekend on May 14, 2017. In so doing, at the age of 39, Macron will become the youngest president in France’s history and is a relative newcomer to the global political stage. Seen as more of a centrist candidate compared to the right leaning Le Pen, Macron is expected to maintain France’s position with the European Union and continue its use of the Euro as its currency.

The victory was largely expected according to the pre-election polls and the actual polling results held true to form with Macron winning approximately 65% of the votes cast. Many investors were surprised on Monday when European stock prices moved slightly lower as most thought that the “status-quo” result would lead to an upswing in European stock prices. We believe this short-term behavior is more related to the widely recognized “buy the rumor, sell the news” trading philosophy than it is a referendum on the investment community’s outlook for a Macron presidency. Despite this, there is still quite a deal of uncertainty over how Macron will govern and if his policies will be supportive of future economic growth in France.

The Macron election does remove one of the clouds lingering over the European continent in that a Le Pen victory could have led to France being the second country, behind Great Britain, to announce its intentions to leave the European Union (EU). This second departure could have been even more of a market disruption than Brexit was/is as France is currently Europe’s 3rd largest economy, behind Great Britain and Germany, and they, as opposed to Great Britain, use the Euro as its base currency. A second EU departure, coupled with the first country to abandon the Euro currency, could have led to short-term market volatility in capital markets worldwide. However, since this did not happen, a certain sense of calm has returned to the Eurozone, at least until the next scheduled election takes place or until the next country within the EU, such as one of the P.I.I.G.S. (i.e. Portugal, Italy, Ireland, Greece and Spain) countries, experiences its own, new set of financial difficulties.

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Disclosure: Hennion & Walsh Asset Management currently has allocations within ...

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