Equity markets continued to hang in the balance, caught between bullish annual corporate earnings reports and a resurgent risk of a Greek exit from the eurozone, amid fears over the prospects of the future electoral calendar. The 10-year yield spread between France and Germany reached its widest level since the end of 2012, at around 70 basis points. Major international investors have also been selling French sovereign bonds and switching into German securities instead.
For example, Japanese investors sold 161.8 billion yen of French bonds during November, representing the first month of net negative outflow since December 2015. Bond investors are probably uncomfortable ahead of the French presidential election, which is increasingly being perceived as a source of stress and uncertainty, an explosive cocktail for savers obsessed by security and visibility.
For the time being however, the French economy has remained on track, with industrial investment starting to take off and demand picking-up in the property market. Both of these indicators so-far contradict the portenders of doom regarding the result of the forthcoming election, which is vital for the future of France, the eurozone and Europe. The highly-quotable French author Gustave Flaubert, in a letter to his contemporary George Sand, wrote “man is nothing, his work is everything”.
As electoral battles rage and as campaign promises transform into dictatorial decrees or simply vanish into thin air, in a climate where political personalities become the unhealthy focus of the social media, or even misuse social networks themselves, let us hope that the actions and real facts behind these women and men, who will govern the world, carry more weight than popular opinion, political posturing or even insidious slander.
Igor de Maack, Fund manager and spokesperson at DNCA. This article was finalised in February 10th, 2017.
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