The Impact of France’s Election Campaign on Financial Markets

The recent violent protests in France against the far-right National Rally have sparked concerns as the country gears up for the upcoming election campaign. Hundreds of thousands of demonstrators took to the streets to express their opposition to the rising nationalist sentiment promoted by Marine Le Pen and RN President Jordan Bardella. The unrest, which saw clashes between protesters and police, has added to the already existing turmoil in the country following President Emmanuel Macron’s decision to dissolve parliament.

With National Rally leading in the polls at 35%, there is growing uncertainty about the outcome of the election. The potential for a far-right majority has raised concerns among experts, with predictions of “major downside risks” for France. As a result of this uncertainty, financial markets have experienced volatility, with the French CAC 40 losing over 6.2% in a single week – its worst weekly loss since March 2022.

While some analysts believe that the sell-off of French stocks may have been premature, others suggest that the volatility is likely to persist in the run-up to the election. Sharon Bell, senior European strategist at Goldman Sachs, argues that the market reaction to the election may be exaggerated, particularly affecting small caps and domestic French stocks. Societe Generale and Deutsche Bank have both highlighted the ongoing uncertainty surrounding the election and its potential impact on financial markets.

President Macron’s decision to dissolve parliament and his efforts to discredit the legitimacy of the National Rally have been seen as a strategic gamble to influence the outcome of the election. By creating a scenario of a “messy” hung parliament, Macron aims to caution voters about the consequences of a far-right majority in the long term. This approach has introduced a new level of uncertainty into the political landscape, which has translated into market volatility.

As France’s election campaign gains momentum, the impact on financial markets is becoming increasingly evident. The protests against the National Rally, the unpredictability of the election outcome, and the strategic maneuvers by President Macron have all contributed to the heightened levels of uncertainty. As investors and analysts navigate through this period of instability, it is important to remain cautious and vigilant in assessing the potential risks and opportunities that may arise from the upcoming election.