Easter is traditionally celebrated with culinary delights, particularly chocolate. For the financial markets however, the Easter weekend means two fewer trading days as Good Friday and Easter Monday are holidays. There will then be four market days left until a decisive election for France, for Europe and for financial markets, particularly in the eurozone. Voters are now in the final phase of the decision-making process. Gaps can therefore be closed during this period, as media-driven populist trends give way to harsh realities and the secret of the polling booth. The participation rate, which is traditionally high for both rounds of the presidential election, averaging 80%, will be one of the key factors.
Lastly, the resurgence of common sense and base financial and economic aspirations could help avoid a disaster scenario. However, investors will be gripped by fear until 23 April, despite the reporting season getting off to a particularly good start (LVMH and Faurecia for example). Corporate earnings have so far reflected sustained economic momentum, notably in Europe, but also globally.
In the US, where growth has been maintained despite the strong dollar, which spiked towards 1.06, we have seen the most rapid political U-turn ever, by an administration wrong-footed by its own contradictions. Donald Trump had declared that he would be a non-interventionist president, but has since ordered a military strike in Syria and sent an aircraft carrier into the coastal waters off Korea. He also said that NATO was obsolete, but is now relying on this organisation to seek allies of convenience. He promised improved relations with Russia, but has already apparently fallen out with Vladimir, who is supposed to have facilitated his election. He had targeted China as the main enemy and is now seeking to get closer to Xi Jinping in order to counter the “pleasant” Kim Jong-Un.
These events have taught us that campaign promises often shatter against the hazards of political and economic realities. Pending the results of the election which remains as undecided as ever, no major investment decisions should be taken over the next few days.
Igor de Maack, Fund manager and spokesperson at DNCA. This article was finalised in April 13th, 2017.
This promotional document is a simplified presentation and does not constitute a subscription offer or an investment recommendation. No part of this document may be reproduced, published or distributed without prior approval from the investment management company.
DNCA Investments is a trademark held by DNCA Finance