Revitalising France Jupiter News

Stephen Mitchell, Head of Strategy, Global Equities at Jupiter Asset Management, on the outcome of the French presidential election. 

Jupiter News

• Voters elected Emmanuel Macron for his pro-business policy proposals
• France’s economy had seen investment and entrepreneurship stall
• Shares should react steadily – but to build on the recent rally investors need to assess Macron’s key appointments

Above all the final run into the French election proved to be about the misery of France’s 10% unemployment rate – double that of its northern European neighbours – more than about immigration. Voters elected Emmanuel Macron for his pro-business policy proposals which have the potential to unlock long held back investment and stimulate French markets. They chose to swing the pendulum back from Hollande’s paralysing tax increases to more conventional tax cuts and labour reform. Liberalisation of key industries now becomes a key discussion point heading into the June parliamentary elections.

France’s economy had seen investment and entrepreneurship stall compared to its northern neighbours and the electorate ultimately recognised this problem. French voters opted for the conventional solutions favoured particularly by Germany, rather than the radical proposals of Marine Le Pen and the Front National.

"The threat of populism in France gains a reprieve that the current upward economic momentum in Europe will assist – this is a reprieve that requires Macron and his parliament, when elected in June, to deliver on promises."

For Europe, this result – and Angela Merkel’s strong showing on Sunday in the Schleswig-Holstein state election mean the core of Europe pulls closer together. Macron wants to improve relations with Germany, although he is not without protectionist tendencies. The threat of populism in France gains a reprieve that the current upward economic momentum in Europe will assist – this is a reprieve that requires Macron and his parliament, when elected in June, to deliver on promises.

Markets have been trading on the basis of a Macron win; nevertheless we should see the interest rate at which French and Italian governments have been borrowing on the market compared to their German counterparts narrow further. Shares should react steadily – but to build on the recent rally need to assess Macron’s key appointments as he turns “En Marche” from a movement into a party. The next step is thus new appointments including a prime minister and for Macron to oversee legislative elections that will deliver a parliament which should hopefully assist this young leader’s vision for revitalising France.