The more substantive popular verdict on new French president Emmanuel Macron's political agenda will come in June, says Steven Andrew, with the election of representatives to the country's National Assembly.
The result of one of the most combative French presidential elections in recent years was in line with opinion polls and saw the centrist Emmanuel Macron chosen as the new leader of the country, defeating far-right candidate Marine Le Pen by 66.06% of the vote to 33.94%.
This marks an important shift in the narrative around European politics - not all popular discontent in Europe can be channelled as anti-European Union (EU) or purely nationalistic.
Macron's victory is certainly good news for political supporters of the European project as his programme focuses on a deeper integration and better cooperation between the various countries in the economic bloc. Furthermore, a strong believer in free trade and globalisation, the new French president will aim to benefit from those trends rather than fight to reverse them.
This makes his victory all the more impressive, given that popular discontent has been interpreted as a rejection of both closer EU integration and of the merits of globalisation. His victory, however, is more about what has been rejected than it is about any distinct shift in the direction of French politics.
Certainly, Macron has disrupted the bipartite status quo, with the adoption of a Blairite ‘Third Way' style - at least in presentation. But we will have to wait until the elections to the National Assembly in June to determine the extent to which this represents a tangible change in the direction of French economic policy.
With that in mind, it might be wise to conclude that the result represents more a rejection of Le Pen's brand of nationalism than a whole-hearted endorsement of Macron's internationalism.
For Macron, the more substantive popular verdict on his political agenda for France will come in June, with the elections to the National Assembly.
As he is leading a newly formed minor party, En Marche, he will need to fight hard to obtain the necessary majority in the National Assembly in order to avoid a ‘cohabitation' government where the prime minister or ‘Premier', who exercises the main executive authority, is part of the opposition and may happily ignore the President's programme.
From an investment standpoint, focusing on the facts remains key, of course. The economic backdrop in France has improved significantly in recent years, as indeed it has across the euro region. This has been apparent not only in rising growth and falling unemployment rates but also, more recently, in significant upside surprises to market expectations for company earnings and sales during the opening period of 2017.
This suggests euro area equities, currently attractively priced, could deliver substantial investment returns in the period ahead. A disruption to the ‘euro-fragmentation' narrative should encourage investors to focus more on improving fundamental data across the region. On the fixed income side, the debt of peripheral sovereigns such as Portugal should benefit from a reduced fear of political instability.
Steven Andrew is a macro multi-asset fund manager at M&G Investments
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