Predictions from Wall Street, Goldman Sachs, Citi, SocGen

While French voters go to the polls on Sunday, Wall Street predicts the market will be disrupted if far-right candidate Marine Le Pen turns out to win.

Timothy A. Clary | Afp | Getty Images

French voters go to the polls on Sunday to cast their ballots in the final round of a close presidential race between incumbent Emmanuel Macron and rival Marine Le Pen.

Centristen Macron was seen taking the lead against his right-wing extremist opponent on Friday as the pair face a rebroadcast of their 2017 tete-a-tete.

On the last day of the campaign ahead of the weekend’s second round of polls, polls showed Macron leading 57.5% over Le Pen’s 42.5%.

But with the election coming at a time of renewed economic and political pressure, both in the domestic market and in Europe as a whole, the result, according to Wall Street, is far from certain.

Here’s a look at some major banks’ predictions:

Goldman Sachs

Goldman Sachs has focused on opinion polls, citing 90% odds of a Macron victory.

Should the incumbent succeed, investors can expect continuity in the markets – even as Macron seeks to revive its reformist agenda. Such reforms are already largely embedded in current market forecasts, the bank said in a research note on Thursday.

Should Le Pen win, however, the markets could face a shock amid growing uncertainty surrounding France’s domestic and EU policies.

Under France’s electoral system, the powers of the president are largely dictated by parliament. The ability of the ultimate victory to govern will therefore be decided by the parliamentary elections in June, and with little parliamentary popularity, Le Pen may face an institutional stalemate.

It could significantly hurt investor confidence, Goldman said, adding that its market team would look for a significant widening of the state gaps in the event of a Le Pen victory.


While Citigroup’s base case is also for a Macron victory, its probability is less clear with only 65%.

In fact, the Wall Street bank said the chance of a Le Pen victory is now “significantly more likely than in 2017”, amid the risk of low turnout and reluctance among left-wing voters to support Macron.

It could pose downside risks to the stock markets, with French banks likely to face the biggest hit.

“A surprising victory by Le Pen, and an associated rise in bond spreads, is likely to put downward pressure on the overall performance of the French stock market,” it said in a note on Tuesday.

The euro, meanwhile, would come under pressure from a Le Pen victory, which would likely fall to 1,065 against the dollar, the bank said. A Macron victory, on the other hand, would provide “mild upside”.

Societe Generale

For Societe Generale, the final result is also unclear, and a Le Pen victory “can not be ruled out.”

“The race is very close and the uncertainty remains high. We still see complacency around this election and a Le Pen victory would lead to sharp re-prices,” the French bank said on Tuesday.

Again, stock markets – particularly eurozone banks and Italian equities, both of which are sensitive to EU integration – will be among those hardest hit by a Le Pen victory.

The bank has also previously named around 37 French shares with market values ​​over 1 billion euros, which may come under particular pressure from political risks around social unrest, nationalization of assets and EU policy. These include Air France-KLM, Accor and Renault.

In the debt markets, meanwhile, the spread between French and German 10-year bonds could jump to 90 basis points before eventually falling in the 60-90 basis point range if Le Pen wins. If Macron were re-elected, the spreads would likely remain around current levels of 45-50 basis points, it said.

‘A lot at stake’

Economists elsewhere agreed that the end result could mark a decisive turning point in French politics.

“A victory for one of them would take France on a completely different political, economic, European and geopolitical path,” ING Economics said on Thursday.

While a Macron victory is likely to lead to further EU integration, a Le Pen victory would be “unfavorable to the cohesion of Europe” at a time when it is facing renewed pressure from opponents in Russia.

“As France has always been one of the driving forces behind European integration, the election of a Eurosceptic French president would be a rude awakening for the EU. Not to mention the fact that Le Pen has also been more skeptical of European sanctions against Russia, “reads a note.

Among Le Pen’s priorities is to withdraw France from NATO’s integrated command and seek rapprochement with Moscow – a clear departure from the EU’s broader position.

“This leap into the unknown is likely to lead to a negative reaction in the financial markets and a very uncertain economic trajectory that weighs on the growth prospects for the coming years,” ING said.

Meanwhile, the couple’s conflicting views on domestic policy could have major implications for business and foreign investment, according to Berenberg Economics.

“A lot is at stake for France and the EU,” economists noted on Friday.

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