It’s old news now, but Emmanuel Macron has officially won the presidential election in France. The centrist ex-banker with a pro-European attitude and a special interest in economic growth and financial matters has won the election by a huge margin; the current available projections are estimating that at least 65% of the French population voted for Macron. His victory has sent ripples through the traditional French political system, as he doesn’t belong to any of the major political parties. At only 39 years old, he has edged out Napolean Bonaparte himself, who rose to power at the age of 40, as the youngest leader of France in history. It’s a good day in France for those among us who support European unity, international cooperation, the free market, and centrist politics. After a tumultuous few months of geo-political instability, this is a welcome sign of support for the status quo. Around the world, financial markets have let out an audible sigh of relief.
So what does this mean for you, a cunning investor and loyal Dynalect Subscriber?
Unfortunately, a lot of the opportunity to take advantage of recent market confidence in the wake of the French election has already passed. After Macron and Le Pen won the first round of the election, two weeks ago, global markets pre-emptively priced in Macron’s victory as the likely outcome of today. As of market close last Friday, the Euro Stoxx 50 index was already up nearly 6.4% since April 23rd, following the first round of the election. While the confidence in European securities trading is likely to continue moving through at least the short term, it is unlikely that European or global securities will continue to appreciate significantly after the expected victory of Macron.
One important thing to consider here is that Macron has won the presidency, but it is still very unclear whether or not he will be able to piece together a supportive majority in parliament; as a political outsider, Macron doesn’t have the immediate backing of any of the major parties in parliament. The French parliamentary elections will be taking place next month starting on June 11th, and we here at Dynalect will be watching very closely to see how Macron is able to gain the support of a majority coalition in the congress. Without it, he will have a very hard time marking good on his campaign promises of economic growth and further European integration, both of which will be good news for global markets. In terms of trading, the markets might prove to be very sensitive to news about Macron and the French parliament, which could create a good opportunity to practice a little short-term trading as the value of securities fluctuates according to expectations about Macron’s political reality.
At the end of the day, the real importance of Macron’s election, especially in terms of global markets, is not the change it will bring, but instead the change we have avoided. By electing a centrist candidate, who largely supports the status quo and has a very high opinion of the European project, the French people have sent a message of reassurance to the world that business as usual is not necessarily such a fleeting concept. In the midst of what feels like major geo-political shifts, such the rise of disruptive global populism, Macron’s victory is a like a small night light, softly illuminating an otherwise dark and uncertain time and offering a sense of comfort against an unsettling global landscape.
Building on this notion, the implication of Macron’s victory for the global markets is primarily a sense of stability and continuity. Equities markets around the world, and especially in the United States, have been climbing at a relatively alarming pace, and many financial analysts suspect a looming correction that could see shares of companies fall by as much as 10-15% in the near future. Such a correction will likely be triggered by some global event that serves to awaken investors to the risk inherent in speculative trading (*cough* Tesla *cough*), and thus make sudden movements to shift towards more prudent and stable investment opportunities. The French election could have very well proven to be the spark that ignites the fuse, but as it stands now it looks like we’ve all dodged that bullet and can turn out attention to the future. Your move, North Korea.
See you next week…