In this year of elections, it’s interesting to take stock of the first-round results of the French poll delivered on Sunday. With the youthful centrist Emmanuel Macron taking the lead versus Marine Le Pen and now with strong endorsement from banished left and right mainstream parties, it is now most likely that he will be confirmed as President of the Republic in just 2 weeks’ time. Of course, we have been here before, so a shock result cannot be ruled out! Never has Le Front National attracted so many voters, nearly 7.6m, although a recent Harris poll suggests only 13% of French voters believe she will prevail 7th May.

For the EU, the result, if confirmed, is a major boost and whilst this may strengthen the resolve of EU negotiators in the Brexit discussions, it should be greeted with relief everywhere. Whilst Marine Le Pen had softened some of her more extreme views of late, the rise of nationalist populism across Europe and further afield, has pushed the political agenda perhaps too far to the right. Mark Rutte’s re-election in the Netherlands last month relied on the modest, liberal politician adopting in part some of the rhetoric of the far right, aided by his sure-footed handling of a political spat with Turkey just days before the vote. Macron’s centrist policy, pro-business and socially liberal appears to chime well with voters tired of the old choices in France and may be a blueprint for a new European agenda and, dare we say it, reform!

Emmanuel Macron previously served two years as Francois Hollande’s minister for the economy before forming his own political party, En Marche! in April last year. With Hollande, very unpopular and both mainstream parties faring badly, taking the opportunity to forge a new identity for France has proved his greatest asset. In the nick of time Macron may have saved France from a much worse fate. Fortunately, last week’s terrorist attack in Paris, appears to have done little to embolden support for Le Front National or alter the first-round result. Le Pen’s decision overnight to resign as head of her party is largely symbolic and a traditional Presidential attempt to rise above the political fray.

Certainly, financial markets have reacted very positively to the first-round results in France. The Euro rallied strongly along with major stock markets everywhere. The Dax rose more than 300 points and credit spreads in Europe narrowed sharply, indicating a climate of reduced risk and tension. Gold fell from recent highs. The Pound has remained largely stable versus the Dollar, around 1.28.

Whilst different in some key ways to the circumstances that produced Brexit and the election of Donald Trump, the result of the first round of the French election is clearly a rejection of much that the old guard in French and European politics represents. Whichever candidate wins, for the first time in 60 years, France will have a President from outside the political mainstream, offering the potential for a seismic shift in the policy agenda. If it is to be Macron, it will up to him and his fledgling party to take the steps needed to turn around a fundamentally weak French economy, whilst encouraging badly needed European reform. This is a huge challenge that may ultimately fail. Legislative elections in France take place in June and it is likely the mainstream parties will colonise most of the vote. With few representatives, En Marche! May struggle to force through the required policy action, no matter how popular Macron remains. We should note, in the US, even with control of both houses, Donald Trump is, so far, unable to push through most of the agenda upon which he was elected. The spectre of a lame-duck President remains real.


Mike Harris – Investment Director