French elections are not usually a crucially relevant event for the markets (as is the case with elections in the United States). Yes OK, The entry on the scene of the new candidate of the extreme right, the ultra Éric Zemmour, has raised the temperature of the appointment of the French with the ballot boxes in the eyes of investors.
His positioning to the right of the far-right Marine Le Pen and the fact that he has been convicted of hate crimes have made him a kind of French ‘Donald Trump’, who does threaten to influence the development of stock exchanges.
In that sense, it is worth wondering if the markets will react in a similar way to what happened in 2016 during the US elections.
Then the dollar depreciated; while long-term bonds were trading with moderate returns.
But, after the election, all assets soared due to the excess of cautious positions accumulated during the preceding months.
What can happen to French assets?
This precedent serves to try to anticipate what may happen in the French market.
One would expect drops throughout the months preceding the elections if Zemmour were to increase his intention to vote, which would later be reversed by a strong rebound, whether he is elected or not.
Specifically, the euro is likely to suffer; while the spreads of French and German debt will widen and, in addition, we could see a greater trend towards the search for intra-European refuge through the Swiss franc and the Danish and Swedish crowns.
“Scaremongering in the media works to scare investors. Therefore, we imagine such a positioning effect or even more pronounced if the media really began to believe that there is a real risk that Éric Zemmour will win the presidential race ”, says a Nordea report written by Andreas Steno Larsen and Sara Simone Strom.
In this environment, the plays that could work well are, according to Nordea experts: short in France relative to the Netherlands in the bond space; buy Danish crowns, Swedish crowns or Swiss francs against the euro; and play the euro-dollar with calendar effect.
Zemmour’s chances of becoming president of France
But does Zemmour really have a chance of reaching the presidency of France?
Experience shows us that the possibilities of populist candidates should not be underestimated (let’s remember the case of Trump or Brexit), although it is true that the specific characteristics of the French elections (with two rounds) make their victory extremely difficult.
Even so, Nordea experts recall that Zemmour shares characteristics with Trump, such as his high popularity and media profile, that raise his potential.
Like Trump, Zemmour is a television star and an ‘outsider’ of the political class. It is a familiar face that is not afraid to say ‘things as they are’. Unlike his competitors, he is not afraid to enter into religious or racial provocations. Likewise, she has a very hard line in areas such as immigration and defends intolerance against political correctness and feminism ”, summarizes Nordea’s document.
Zemmour similarities and differences with Donald Trump
Thus, with a mixture of excessive posturing and promises, Zemmour has occupied more television spots and newspaper front pages than its competitors in the last month.
In that sense, the parallels between both figures are clear. But there are also differences between them. Specifically, Zemmour is more refined than Trump.
“Trump led a battle against the intellectuals, while Zemmour has an intellectual patina. With a mixture of intellectual respectability and populism, it is more attractive to moderate conservatives and the electorate of the working class, ”adds Nordea’s document.
Energy prices, keys to limit Macron’s possibilities
Key to Zemmour’s electoral possibilities is going to be an issue that is also very topical in Spain: the evolution of energy prices and the position of the candidates on this issue.
The current president and candidate for reelection, Emmanuel Macron, has been accused of not offering solutions to this problem by refusing to cut energy taxes, precisely the proposal that Zemmour has made.
Let us remember that it was precisely the high energy costs that motivated the yellow vests to take to the streets, one of the hardest moments for Macron’s presidency.
Therefore, in Nordea they believe that “Zemmour has a moderate chance of being the next president of France” and, of course, much more likely than the other candidate of the far right, Marine Le Pen.