French Revolution?

How does the French election figure into this crazy season?

Photo: Benh Lieu Song/ Source: Wikipedeia

France’s weekend’s election prompted markets to rally around the world – a development some have called, “Le Phew.” The French stock market rose by 5% – the equivalent of 1000 points on the Dow. Other markets also rallied: Germany was up 3, London 2%, even Japan rose at least 1%. There has been a global “risk-on” trade, because the most radical outcome – a France that rejects the Euro – seems to have been averted, at least for now.

But there’s the rub. This reprieve is at best temporary. Marine Le Pen isn’t going away, nor are the forces that brought her to such prominence. In their open first-round of the election process, at least 41% of French voters chose someone who is opposed to France’s participation in the Euro. While Le Pen has dominated the headlines, Jean-Luc Melenchon – a communist candidate and admirer of Hugo Chavez – received just under 20% of the vote. Between the winner Macron, who comes from outside the political establishment, the radical Le Pen, who will be his challenger in the run-off, and the far-left candidate Melenchon, there is a sizable plurality of French voters who wish to see fundamental change in the system, even if most of them want to keep the Euro.

Source: New York Times

The challenge is now for Emmanuel Macron to consolidate his gains, win the run-off election on May 7th – less than two weeks from now – and form a governing coalition. Because he is from outside the system he may be able to effect his “positive revolution.” But he would come into power without a party, without the normal mechanisms of governance. His movement, En Marche!, was created less than a year ago, and seems more like a tech startup than a classic political party.

So even if Macron wins, France won’t go back to its statist status quo. Between Brexit and Trump and the French elections, there’s little of the old order left. France is turning the page. It’s an open question as to how the next chapter will read.

Douglas R. Tengdin, CFA

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