Macron Wins French Election

May 2017

Macron Wins French Election

By Florence Tan, Tae Hyon Ahn, Celestee Tan

Emmanuel Macron, an independent pro-European centrist will become the new president of France. In round two of the May 7 French Presidential election Macron received around 65% of the vote to National Front leader Marine Le Pen's (35%). Macron's strong performance exceeds forecasts but still shows that the National Front has again grown significantly as a political force. Macron will take office by May 14.

Macron's win, as well as the victories of mainstream parties in the Dutch and potentially German elections reinforce Citi analysts' base case for relatively benign outcomes in European elections this year.

Market Implications

Investors have been warming up to European equities as expectations of a Macron win rose. In the week following round one of the election, European equity funds reported their largest inflows since late 2015. The euro also hit a six-month high leading into round two of the election on the weekend.

An anti-EU government is likely to come into power in Italy next year.

Equities: In addition to reduced fears that political instability will derail Europe's recovery, improving economic growth may also support European equities. Business optimism is high and employment in the services sector has increased for 13 consecutive months. A more stable political backdrop, an improving economy and attractive valuations could further increase the appeal of European equities.

Bonds: On the other hand, current low bond yields and prospects of tighter monetary policy in the eurozone next year have led Citi analysts to be more selective within European investment grade corporate and high yield bonds.

Euro: With the euro hitting a six-month high leading up to the election, Citi analysts believe that there could be limited upside post Macron's win and investors may want to take some profits.

Risks Remain

  1. Investors should note that challenges remain for France and Europe. Given that the fragmentation of the political landscape implies that the 577 seats of the lower house will be shared by five main political movements, Macron may not obtain an outright majority in parliament, which can affect his ability to bring about reforms in France.
  2. An anti-EU government is likely to come into power in Italy next year although Citi analysts believe that Italy's electoral system can help reduce the risks of extreme outcomes.

Take your next step with Citigold

Enquire now

Important Information:

Any advice is general advice only. It was prepared without taking into account your objectives, financial situation, or needs. You should consider if this advice is appropriate for your situation. We recommend you read the Product Disclosure Statement (PDS) or Terms and Conditions, available online or via a Citibank branch, in addition to seeking independent legal, financial and taxation advice on your personal circumstances before acting on the information contained in this material.

This material is for general information only. All opinions are subject to change without notice. This material is taken from sources which are believed to be accurate; however Citibank accepts no liability of any kind to any person who relies on the information in it. Investments are not deposits or other obligations of, guaranteed, or insured by Citibank N.A., Citigroup Inc., or any of their affiliates or subsidiaries, or by any local government or insurance agency, and are subject to investment risks, including the possible loss of the principal amount invested. Investments are subject to risk, including loss of income and principal. Past performance is not an indicator of future performance. Due to exchange rate fluctuations, you risk losing capital if you invest in foreign currency. Some products are not available to US persons and may not be available in all jurisdictions.