Macro Digest : Mieux vaut prévenir que guérir – French Election

Market reaction:

Sell the fact – We have been very positive Euro and European (mainly French equities) now is time to go NEUTRAL on both as the real work will be vastly different from winning the Presidency.

The Euro growth outperformance should also mean reverse over next few month to be synchronic with US slow-down bringing focus back on our MAIN MACRO story: CONTRACTION in CREDIT IMPULSE led by China and US….


Trade idea: Sell EURJPY @ 123.80 w. 2 ATR stop (2 x 40 tics = 80 tics = 124.60)

Source: Citigroup & Bloomberg LLP



Stock Market performance since End March – Clearly France benefitted….

Bloomberg LLP


Macro 66/34 but 9% blank and Front National clearly made big inroads to become biggest opposition party come June Parliamentary election (June 11 & 18)


Societe Generale, French Election Focus

Source: Societe Generale, Cross Asset Research



One year ago everyone excepted a rerun of Hollande vs. Sarkozy, then Fillon was a safe bet, then finally a 39 Y old won without a party!

Although the far right was dimissed this time one wonders what would have happened if the immigration flow had been similar to 2014/2015 as the one lesson we can draw from the European election remains that everyone is unhappy with the established parties.

Now the focus in France is one June 11 and the Parliamentary election – it seems most likely that President Macron will be short of political majority hence the real work starts now!


The one thing which France needs of course is Labor Market reforms: A 10% unemployment is too high to create sustainable new growth and likewise for Macro to succeed he needs to “help” Le Pen’s voters – the disenfranchised, the anti-globalisation crowd, who is afraid of worse to come.

This is a formidable task, but President Macro timing is good – Europe have been through an “internal devaluation” – a labor market reform and focus on creating jobs instead of keeping jobs should be wonders for France, but …… failing to do so will potentially tip the scale in favor of Le Pen in five years time – The over rising conclusion last night was: Old parties needs to renew, 43% did NOT vote for Macro, 60% of his votes came from voters having someone else a number one choice, the voices of anti-immigration has been lowered, but not stopped, and REFORMS is the only true catalyst for the next five years.

Marketwise – this is the end of European rally – we came into this election convinced Macron would win, believing EURO assets was undervalued – this has now runned its course – The non-europeans mispricing of this event was big but now we are back to focus on Italy, which in my mind in the biggest event risk in Europe, as an early election could unwind everything the Austrian, Dutch and French election has just done – Europe remains fragile but improving – the final test will be Italy, not Germany.



After defeat, Marine Le Pen emerges as leader of French opposition,

Macron vows to heal France’s divisions after victory over Le Pen,

And now for the hard part: Macron may face legislative gridlock,

Macron wins French election, to sighs of relieve in Europe,

Macro the mould breaker: France’s youngest leader since Napoleon

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