The Daily Update - French election

With Brexit and the election of Donald Trump as US President, 2016 has been a year of political change, perhaps even revolution.  Populist politics is seemingly the new zeitgeist as voters have vented their dissatisfaction with rising inequalities blamed on globalisation and more liberal policy agendas instead favouring more conservatism and protectionist approaches to areas such as immigration and potentially trade.  This trend is also spreading to Continental Europe where the Italian referendum on constitutional reform is due on December 4 but could end up being a protest vote against the incumbent government and ‘economic malaise’.  The ongoing primaries for the French Presidential Election next year are also sowing the seeds for a departure from the status quo.

Given global events, expectations are that Marine Le Pen is likely to at least make it to the second round of the French Presidential election but the primary for the Republicans is also generating political shockwaves.  François Fillon was the surprise winner of the primary round of the election for the right-wing Republican Presidential Candidate taking 44 percent of the vote ousting the former French President Sarkozy who only garnered 20.6 percent of the vote.  Alain Juppé, who had been the apparent front-runner, only secured 28.6 percent of the vote.  Fillon will now compete against Juppé in the deciding vote on 27 November and Sarkozy has backed Fillon.  However, to vote one does not have to be a party member but only to pay €2 and register so there has been a contingent of tactical voting against Sarkozy and it is not clear how or if they will vote again.

The winner of this round is most likely to face the far-right candidate Marine Le Pen in the second round run-off in next year’s French Presidential Election: the economist estimates that Marine Le Pen has a 40 percent chance of winning the Presidential Election which is not that surprising given her party secured 27 percent of the vote in the regional elections in December 2015.  The left candidates are looking like they will not capture a large enough share of the vote to make the second round. François Hollande’s approval ratings are at an all-time low and he will likely decide whether to run again in the socialist primaries after the republican candidate is elected.  But regardless of this, the socialist vote looks divided with Emmanuel Macron running as an independent and another leftist candidate, Jean-Luc Mélenchon, also likely to take some of the votes.

François Fillon has been labelled an economic liberal with a reform driven agenda (with Thatcherite tendencies); he prefers to describe himself as a pragmatist.  One of his key themes is that France needs change: ‘If we continue with policies that don’t change how the French live, then we will end up with the far right. I can respond to the France that wants more authority.’  His policies include measures such as lengthening the work week (to 39 hours from 35), increasing the retirement age to 65 and better immigration controls.  He has also vowed to eliminate a half million public sector jobs, cut spending by 100bn euros (USD106bn) and proposes a 50bn euro tax cut (although increases to VAT) and shift away from deficits. Fillon is ready to work with Donald Trump and is said to want a closer relationship with Russia.  On other matters such as gay adoption he is extremely conservative being a devout Catholic.

Fillon, who was Prime Minister when Sarkozy was President, may in practice struggle to implement all the changes he talks about: some of his proposals are bound to face opposition from the unions.  In contrast, Juppé was Prime Minister (1995-1997) under Jacques Chirac and is perceived as having a more centrist approach and is less extreme on immigration than Fillon.  He is also looking to raise the retirement age to 65, to increase hours worked beyond 35 and tax cuts (although increases to VAT) but he is targeting only 200-300,000 public sector job cuts.  Both candidates are pro-Europe.   But Juppé may face more scrutiny in a run off about his past having been given a 14 month suspended sentence in 2004 and been barred from holding office for a year in the 1980s.

What does seem clear is that people in France are dissatisfied and frustrated with the status quo.  With 283 terrorist related deaths since January 2015, an unemployment rate still around 10 percent momentum looks to be with candidates offering change.

Please read this important information before proceeding. It contains legal and regulatory notices relevant to the information on this site.

This website provides information about Stratton Street Capital LLP ("Stratton Street"). Stratton Street is authorised and regulated by the UK's Financial Conduct Authority. The content of this website has been prepared by Stratton Street from its records and is believed to be accurate but we do not accept any liability or responsibility in respect of the information of any views expressed herein. The information, material and content provided in the pages of this website may be changed at any time by us. Information on this website may be out of date and may not be updated or removed.

The website is provided for the main purpose of providing generic information on Stratton Street and on our investment philosophy for the use of financial professionals in the United Kingdom that qualify as Professional Clients or Eligible Counterparties under the rules of the United Kingdom Financial Conduct Authority (the "FCA"). The information in this website is not intended for the use of and should not be relied on by any person who would qualify as a Retail Client. Products and services referred to on this website are offered only at times when, and in jurisdictions where, they may be lawfully offered. The information on this website is not directed to any person in the United States. The provision of the information on this website does not constitute an offer to purchase securities to any person in the United States (other than a professional fiduciary acting for the account of a non-U.S person) or to any U.S. person as such term is defined under the Securities Act of 1933, as amended.

The website is not intended to offer investors the opportunity to invest in any Alternative Investment Fund ("AIF") product. The AIFs managed by Stratton Street are not being marketed in the European Economic Area ("EEA") and any eligible potential investor from the EEA who wishes to obtain information on the AIFs will only be provided with materials upon receipt by Stratton Street of an appropriate reverse solicitation request in accordance with the requirements of the EU Alternative Investment Fund Managers Directive ("AIFMD") and national law in their home jurisdiction. By proceeding you confirm that you are not accessing this website in the context of a potential investment by an EEA investor in the AIFs managed by Stratton Street and that you have read, understood and agree to these terms.

No information contained in this website should be deemed to constitute the provision of financial, investment or other professional advice in any way. The website should not be relied upon as including sufficient information to support any investment decision. If you are in doubt as to the appropriate course of action we recommend that you consult your own independent financial adviser, stockbroker, solicitor, accountant or other professional adviser. Past performance is not necessarily a guide to the future. The value of investments and the income from them may go down as well as up. An application for any investment or service referred to on this site may only be made on the basis of the offer document, key features, prospectus or other applicable terms relating to the specific investment or service.

Where we provide hypertext links to other locations on the Internet, we do so for information purposes only. We are not responsible for the content of any other websites or pages linked to or linking to this website. We have not verified the content of any such websites. Such websites may contain products and services that are not authorised in your jurisdiction. Following links to any other websites or pages shall be at your own risk and we shall not be responsible or liable for any damages or in other way in connection with linking.

By using this site, you should be aware that we may disclose any information that we hold about you to any regulatory authority to which we are subject, or to any person legally empowered to require such information.

This website uses cookies to improve user experience, by clicking the "I Accept" button below means you consent to the use of cookies on our website.