Market Perspectives


Macron win means no “Frexit”


Emmanuel Macron's victory over Marine Le Pen in the French presidential election on May 7 largely confirmed what most investors had expected. Macron cruised to the presidency, securing at least 65% of the vote.

However, we believe markets still will get an immediate positive impact from the removal of the risk of a “Frexit” – or France leaving the European Union (EU) – for the next five years. In general, we believe this reassurance is likely to make Europe overall more attractive to investors, especially since Europe’s economy has been performing better this year. We forecast eurozone gross domestic product growth will average just less than 2% in 2017.

Macron made his support of the EU clear during his campaign. He now is expected to push for a tough deal with the U.K., which voted last year to leave the EU. That may mean tougher terms for the U.K. as it negotiates trade and other deals for its exit in about two years.

A Le Pen victory would have raised questions about France's future in the EU and the eurozone. Many had feared the anti-immigration, protectionist and isolationist views that were part of the U.S. presidential election and U.K. “Brexit” referendum would spread to mainland Europe.

With about 500 million consumers, the EU is a massive market for U.S. goods and remains the biggest single U.S. trading partner. For now, it appears the U.S. can continue to rely on the EU for trade and mutual defense.

Macron appeared recently at an event with outgoing President Francois Hollande and now inherits the problems that undermined Hollande: France's stagnant economy, a 10% unemployment rate and growing concerns about terrorism.

Given Macron’s reformist agenda, we think the election result is likely to be seen as market friendly, especially if follow-up elections in June produce a reform-minded parliament. His ability to push reforms and his legislative agenda will depend on how well his party does those elections, as well as whether he can partner with others if his party does not have a majority. Those reforms mostly deal with labor flexibility and reducing the corporate tax rate to 25% from 33% by 2022.

Sources: Additional information from CBS News and

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Key Takeaways

  • Markets likely to get immediate positive impact from removal of “Frexit” risk.
  • May mean tougher terms for U.K. as it negotiates EU exit.
  • Appears U.S. can continue to rely on EU for trade and mutual defense.

Past performance is not a guarantee of future results. Investing involves risk and the potential to lose principal. The opinions expressed are those of Ivy Investment Management Company and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through May 2017, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial needs, risk tolerance and time horizon.