The French go out to vote Sunday in what seems to be one of the most undecided presidential elections in recent French history.
The failure of the Socialists and the Republicans to get either of their candidates within the polls’ top two favourites, increases the likelihood of a run-off between hard right candidate Marine Le Pen and either of centrist Emmanuel Macron and hard left ex-socialist Jean-Luc Melanchon.
A political change could be seen as positive news, following the unpopular tenure of current president Francois Hollande, yet the underlying political agendas of the election favourites may keep investor nerves jittery, as they seek clarity on France’s future economic prospects.
Marine Le Pen’s National Front party (FN) is well-known, and has been fairly present in past presidential election run-offs as the anti-EU, anti-immigration, protectionist movement. The support gathered for Le Pen in the past few years has stemmed off the number of terror attacks and terrorist groups present on French soil.
With low chances of pulling off a presidential victory, poll numbers should not be taken for granted. Although the FN has historically failed to gather the needed support and/or coalition of other political parties in the second round of elections, due mainly to Le Pen’s isolation in her political ideologies, it remains to be seen whether voters of underdog Republican candidate Francois Fillon cast their votes for far-right winger Le Pen or opt to abstain from the second round vote.
Latest polls show a third of Fillon voters giving their vote to Le Pen, should their candidate fail to make the run-off. Though, Jean Luc-Melanchon’s recent rally in the polls on the back of positive debate performances have seen him overtake Fillon and stand a chance of making the run-off himself.
Should Melanchon fail to do so, his voters would most likely vote as left as possible and consequently against Le Pen.
Hence, on current poll numbers, Le Pen’s chances look weak.
Having said that, a run-off between Melanchon and Le Pen would be the disaster scenario for financial markets. The hard left candidate’s proposals have seen him propose a 100% income tax on incomes twenty times and above the median income.
He also shares similar anti-EU views to Le Pen. Large corporations would surely vote against Melanchon, yet either way both would see anti-EU measures proposed.
The most stable of the favourite candidates seems to be centrist Emmanuel Macron. As ex-economy minister his proposals are pro-growth, fiscal easing measures, seen as a positive for French equities and fixed income securities and consequently European indices.
Fillon’s measures are also pro-growth, though the recent scandal surrounding the employment of his family members with government funds has left his campaign flat in the polls in the final weeks leading up to elections.
Sunday’s first round vote will more than likely see Marine Le Pen come out ahead. Conclusions should not be drawn then however and investor focus should instead turn to who of Fillon, Macron and Melanchon will face off Le Pen in the second round.
The best choice for investors? Fillon or Macron.
If there’s one certain conclusion to be made from the past year, it is to stay cautious of poll figures or even throw them out the window. Sunday’s vote could well generate a surprise.
Disclaimer: This article was issued by Mathieu Ganado, Junior Investment Manager at Calamatta Cuschieri. For more information visit, www.cc.com.mt.The information, views and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.