The French presidential election yesterday resulted in a resounding victory for Emmanuel Macron over Marine Le Pen. This was broadly expected by pollsters and the financial markets, standing in stark contrast to the unexpected outcome of Brexit last June and the US presidential election in November. That said, we believe that the backlash against globalization—one of four key themes influencing markets that we outlined at the beginning of the year—continues.
The win by Macron and his En Marche! party (seen as pro-European Union and centrist) calmed markets, assuaging concerns around alternative scenarios that could have jeopardized the stability of the European Union.
Still, these election results are unusual. While the French electoral system has many political parties, for decades the elections have predominantly featured center-left (Socialist Party) and center-right (Republicans, previously UMP) candidates. Generally, both sides were pro-EU, and supported globalization. This time around, French voters rejected this status-quo, pitting the far-right/anti-EU versus a party that was founded by Macron just a year earlier. Even with low turnout, which would typically favor less traditional candidates, Macron won nearly two-thirds of the vote.
With a new party winning the presidency, the June legislative elections hold interesting implications. Will Macron use the presidential election to successfully control the National Assembly with new and rebranded candidates, or will fringe parties play a larger role? Will he need to embrace a greater degree of populism to build a coalition, or will he pursue technocratic pro-market reforms?
While some of these questions will be answered in the coming months, Macron’s ability to channel the anti-establishment furor that aided his candidacy will be critical in addressing the political malaise in France. We anticipate sharing more thoughts on this topic as Macron looks to bring a “New Deal” to France and the European Union. Stay tuned.