On May 7th, the people of France will decide between two drastically different presidential candidates in an election that has been getting a lot of attention around the world.
With Emmanuel Macron and Marine Le Pen differing so widely on many international and economic issues, the consequences of the French presidential election could easily affect the U.S. economy and the world economy at large.
Listed below are just a few of the things to expect, economically speaking, depending on whether Le Pen or Macron wins.
Marine Le Pen’s Economic Policies
Though Donald Trump has given Le Pen no official endorsement, the President has spoken highly of her, and the two of them do often line up on a lot of issues. Le Pen’s economic policy that is most pertinent to the U.S. economy is her desire to withdraw France from the European Union.
Currently, France is America’s third largest trading partner in Europe. A Le Pen victory, though, could mean a much more protectionist France, which would hurt trade between the two nations. On the other hand, France withdrawing from the EU could potentially open the door for increased trade in the long-term as France grows less reliant on the EU to fill their trade needs.
Le Pen’s opponents worry her policies would lead the country to defaulting on its sovereign debt – an event that would send shockwaves across the world economy, potentially leading up to a financial crisis similar to the one seen in 2008.
Regardless of whether or not this will happen, a Le Pen victory would likely mean an initial tanking of many European stocks, leading investors to be wary of dumping more money into the continent’s economy.
Emmanuel Macron’s Economic Policies
Though Emmanuel Macron is marketed as a political outsider, he’s much more of “status quo” candidate than Le Pen. Macron is a centrist who desires to keep France in the EU and promotes a strong, unified Europe.
While Macron does propose some changes to France’s economic policies, none of them would have the same ripple effects like the changes Le Pen is proposing. From an economic standpoint, Macron can definitely be dubbed the “safer” choice.
Because of this, markets across the world and especially European markets are expected to rise if Macron wins.
What Does This Mean for U.S. Investors?
Though a Le Pen victory could open the door for more partnerships and opportunities between France and the U.S. down the road, the initial backlash of her victory may hit the world economy pretty hard. When considering whether or not to invest in French and European assets at large, your first option is to gamble on a Macron victory and buy European stocks while they are still down (though the prices have been rising in tandem with new polls showing an increased likelihood of a Macron victory).
Another viable option if you are betting on a Le Pen win is to wait until stocks drop after her victory to buy them and then count on a quick rebound. This is risky, but we’ve already seen this scenario play out twice before in the past few months.
Directly after Brexit and Trump’s victory, the market dropped and quickly bounced back. In the case of Trump’s election, U.S. stock prices went on to rise to historic levels.
A Le Pen victory could mean the opportunity to scoop up some cheap European stocks and bank on the rebound as well as the opportunity for new economic relations with France in the coming years.
However, given the volatility that Le Pen winning would bring, most investors are hoping for a Macron victory. According to most analysts, such an upset would be an event more tumultuous than both Brexit and Trump’s success.
Whether this unpredictability would be temporary or long-term is anybody’s guess, but given Le Pen’s drastic economic vision for France, the potential for the latter certainly seems more likely.
Regards,
Ethan Warrick
Editor
Wealth Authority
