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Multi-Asset Blog - The devil and the deep blue sea

Wednesday, February 08, 2017

Will Bartleet, CIO and Portfolio Manager of Pacific Multi-Asset.
The French elections: Between the devil and the deep blue sea? 

2016 was a year of tremendous political upheaval and yet calm markets: the Brexit vote was shrugged off in a few days and Trump’s election result in a couple of hours. How will markets respond to political risks in 2017? 

The first major test comes from the French elections whose process begins in April. Once again French voters find themselves with an unenviable choice between a scandal-tainted candidate in Francois Fillon or the far right Front National leader, Marine Le Pen. French voters faced a similar choice in 2002 when they reluctantly voted for a corrupt Jacques Chirac to keep Jean-Marie Le Pen out of the Elysée Palace. 

Marine Le Pen paints herself as being less extreme than her infamous father but her position on the Europe is anything but. She would take France out of the EU and redenominate its debt into Francs, an act that the ratings agencies would consider as a default. It's no surprise that yields on French bonds compared to Germany’s are at their highest for four years.

Fortunately, this time round voters have another credible option in the independent candidate Emmanuel Macron, former Minister of the Economy. His En Marche! party formed just last year, aims to appeal to voters from both the left and the right who are tired of the traditional parties. Those hoping for tranquil markets must hope that voters turn a blind eye to Fillon’s past transgressions or that Macron’s fresh approach wins the day.

IMPORTANT INFORMATION | Issued and approved by Pacific Capital Partners Limited, a limited company registered in England and Wales, authorised and regulated by the Financial Conduct Authority . The information contained herein is not approved for use by the public and is only intended for recipients who would be generally classified as investment professionals. Information or opinions contained in this article do not constitute an offer to sell or a solicitation, or offer to buy, any securities or financial instruments or investment advice or any advice or recommendation in respect of such securities or other financial instruments. Where past performance is shown it refers to the past and should not be seen as an indication of future performance.

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