Asset managers have generally reacted positively to the results for the first round of the French elections, with Emmanuel Macron and Marine Le Pen going forward to the second round on May 7th.
Fathom Consulting also pointed out that the final opinion polls did a good job of predicting the results. The success of Macron, who is ahead in the polls to win overall, produced a relief rally in European equities, bonds and the euro, but Fathom Consulting said a rise in the value of the euro against the dollar would be short-lived, as the diverging paths of the ECB and the Fed will cause the euro to fall in value later in the year.
NN Investment Partners head of multi-asset, Valentijn van Nieuwenhuijzen, said that there are two important implications for the European economy if Macron does become the next president of France. One would be to reduce the risk of a political shock ending the increasingly strong recovery in the European economy. The second implication is for stronger co-operation between France and Germany at the core of Europe “making the region more able to digest new political, institutional and economic challenges in the future.” But he added that even if Macron becomes president, it is not certain that France will undertake the structural reforms needed for higher long-term growth.
For State Street Global Advisors, head of investments EMEA, Bill Street, commented on the results: “Le Pen will almost certainly be defeated in two weeks’ time, and equities can continue to rally going into 2018 as non-existential risks can be absorbed. The global economy might not be booming, but growth is returning.” Street added: “There could be more surprises to come in an event-packed European calendar however – UK elections, Greek debt talks, German elections, and the possibility of Italian elections in the not-so-distant future are enough to keep markets busy. Downside protection strategies are crucial given that the environment is likely to remain volatile.”