French elections: Macron versus Le Pen

Emma Wall  |   26/04/2017 Text size  Decrease  Increase   |  

Emma Wall: Hello and welcome to the Morningstar series, "Ask the Expert." I'm Emma Wall and I'm joined today by Morningstar Investment Management's Cyrique Bourbon to talk about the French election.

Hello, Cyrique.

Cyrique Bourbon: Good morning, Emma.

Wall: So, the French election is in two parts and we've had part one where two frontrunners have emerged which will go head-to-head next month in the second round of the elections and they are two people that perhaps you would assume were the outsiders because what we have in essence, here is the French election with neither of the two major parties.

Bourbon: Exactly. I think, that is the kind of main message. First is that the traditional parties, the left and the right, are not represented. So, this is interesting from the perspective of the view the French people have taken for the future. Obviously, Marine Le Pen was generally expected to be of the final two given the kind of populism movements and the rise we've seen from these types of movements in the last couple of years globally, but also importantly in France.

Emmanuel Macron, very interesting to see him come as first. Clearly, which is good from a political perspective. I think the French have taken the view that the traditional way of looking at politics, left/right, you probably needed to go beyond that. And Emmanuel Macron, his message was clearly to try and harness the best of both in this campaign. And the French seem willing to give him this mandate or at least he is clearly in the lead.

Wall: He is in the lead and he will be the youngest French President since Napoleon I read this morning. He doesn't have a political background unlike Marine Le Pen which has controversial politics but comes from a family of politicians. What do those two things mean for the French people?

Bourbon: I mean, I think, I would divert slightly. I mean, Emmanuel Macron, he doesn't come from a traditional, say, political family but he does have a similar background in terms of his studies. He has been well-trained. Obviously, he is very young. He has risen through the ranks very quickly. So, he is clearly very clever and has very strong views and very interesting ways of being accepted and presenting himself. So, I think it's very refreshing as well for French politics to have a younger candidate who has got strong views, who seems very dynamic and very positive generally.

Wall: Let's boil it down. This is a sort of beginner's guide to French politics. Le Pen is basically the Trump of France, is that fair, anti-EU, anti-immigration, and Macron is much more left-wing, much more pro-Europe, is that fair?

Bourbon: I think on Le Pen, that's definitely fair. She is clearly anti-Europe, anti-euro, anti-European Union and she basically wants to close the borders in light of what's been happening, especially in the last few years. Macron, I'd say, is still quite--I'd say he is economically a bit more close to the right and socially, in terms of values, probably more close to the left. So, I think, it's kind of a good blend that should work quite well for French politics in the future.

Wall: And Macron is the leader so far, but we have learned over the last couple of years not to trust the polls. We've seen that in the US and indeed, in the UK over Brexit. We've also seen a right-wing politician be very positive for markets in the US Le Pen maybe a divisive character, but if she follows the policies and has the same effect on markets that Trump has in the US, it could actually be a positive thing for stocks. What are the likely outcomes in terms of investment both for economics and indeed, stock markets of these two results?

Bourbon: Yeah, I mean--and I think we see it a little bit this morning. We've got about 4 per cent rally in French equities, broadly speaking, European equities, but banks are up about 9 per cent, 10 per cent in a couple of hours. I've personally thought the outcome of Macron/Le Pen was broadly priced in but it clearly seemed it kind of wasn't. So, it would be interesting to see what happens next.

I think the outcome from a Le Pen win in two weeks' time is most likely to be negative. If you start kind of do the math after the scores last night, you still get to about--probably about 40 per cent for Marine Le Pen. Probably the best-case scenario, I think the kind of unity of the French people against the kind of extremism that she represents will probably prevail. That's what's happened before. Of course, a lot of people say, with Trump you never know. But I think it's quite different.

I mean, the type of moves you require for Le Pen to win in two weeks' time are way, way, way, higher than you saw with Trump winning last year in the States. So, kind of, unlikely in my view. So, from a market perspective, yes, it would be negative if Le Pen were to win. For Macron, it's broadly positive, but I thought most of it was priced in, clearly wasn't quite. And just--I mean, my personal view of investments does remain very long term and we don't anticipate any short-term moves based on the outcome of political events.

And it's worth reminding people and investors that political elections and obviously political mandates are by nature short term, they are finite, so therefore, in the case of France, it's five years and that does mean that for investors with long time horizons of five years on the scale of 20 to 30 is actually not that much.

Wall: Cyrique, thank you very much.

Bourbon: Thanks for having me.

Wall: This is Emma Wall for Morningstar. Thank you for watching.

Video Archive...

Emerging market rally has longer to run
22/03/2018  Emerging markets may have risen in value significantly over the past two years, but we're only just getting started, says Neptune's Ewan Thompson.
3 emerging market stocks for alternative income
21/03/2018  JP Morgan's Omar Negyal highlights three emerging market equities paying a attractive dividends.
Elevators, FMCG among 4 top stocks
14/03/2018  These global companies possess the right attributes for long-term investors, according to BMO Pyrford's CEO and chief investment officer, Tony Cousins.
Aussies tough on corporates but yields enviable
12/03/2018  How this fund manager identifies quality companies in emerging markets, and why it views Australia's investment climate more favourably than other markets.
Morningstar Fund Manager of the Year Award 2018
08/03/2018  Morningstar's Kunal Kotwal explains how we choose our Fund Manager of the Year.
Fundamentals strong for Australian credit
01/03/2018  In this edition of How We Invest Your Money, Western Asset Management's Anthony Kirkham shares his outlook for Australian credit markets.
Opportunities and risks in global credit markets
27/02/2018  In this edition of How We Invest Your Money, John Beck of Franklin Templeton shares his thoughts on the outlook for global credit markets.
FOMO dominant investor sentiment
16/02/2018  Investors are aggressively positioned, with fear-of-missing-out now the overwhelming sentiment , says Morningstar Investment Management's Daniel Needham.
3 top themes in Asian markets
14/02/2018  Diverse themes within financial services and renewables are among the top picks for 2018 from Nikko Asset Management's Eng-Teck Tan.
Accessing world's second-largest stock market
13/02/2018  Given China's ongoing economic growth and increasing representation in global indices, we ask Nikko AM's Eng-Teck Tan what this means for Australian investors.
3 companies tipped for growth
08/02/2018  These very distinct companies across gaming, healthcare and construction are among T. Rowe Price's top Australian equity picks.
Commodities strength augurs well for Aussie shares
06/02/2018  Synchronised global growth and strong commodities form a positive backdrop for Australian equities in 2018, says Randal Jenneke of T. Rowe Price.
Will India live up to Modi's hype?
31/01/2018  The International Monetary Fund has predicted India will drive global growth in 2018, and Prime Minister Modi has made bold promises. What does it mean for investors?
3 macro themes for 2018
31/01/2018  US corporate tax cuts and slow-burning European economic growth feed BlackRock iShares' bullishness on this third market--and equities in general, explains Alex Zaika.
2 top stocks liked by IML
23/01/2018  Investors Mutual senior equities analyst and portfolio manager, Daniel Moore, names some of his team’s favoured healthcare stocks.
Identifying under-appreciated companies an inexact science
18/01/2018  How this fund manager measures the value and quality of its underlying assets--and it isn't all about PE ratios, says Daniel Moore, portfolio manager, Investors Mutual.
Ask The Expert: The what, how and when of multi-asset
18/01/2018  Multi-asset strategies may make more sense than ever amid ongoing volatility, and these are some of the preferred areas for Morningstar Investment Management's senior portfolio manager, Brad Bugg.
3 Sustainable Investing Trends for 2018
11/01/2018  Jon Hale says climate risk, asset manager engagement, and growing advisor interest will be key issues in the coming year.
Fidelity: Inflation is biggest threat to returns in 2018
06/12/2017  Fidelity's UK-based head of equities Sonja Laud explains what has driven positive returns over the past 12 months and looks ahead to where investors can make gains in 2018.
Bogle remains unimpressed with strategic beta
30/10/2017  The Vanguard founder says his long-time strategy of sticking to index funds is still the best bet.
Jack Bogle on what's next for active investing
30/10/2017  The Vanguard founder says net withdrawals have been offset by rising stock prices.
Bogle: Vanguard's size a worry
30/10/2017  Diminishing economies of scale and potential regulatory concerns limits how much bigger Vanguard should become, says founder Jack Bogle.
Bogle: Index funds the best hope for corporate governance
25/10/2017  Corporate governance should be based on long-term factors affecting the corporation, and traditional index funds are the only true, long-term investors, says Vanguard founder Jack Bogle.
Bogle: The good and the bad of ETF trading
25/10/2017  Any significant amount of trading will decrease your return relative to the market, says the Vanguard founder.
Bogle: ETF flows muddle valuation, risk picture
25/10/2017  Large swings in ETF flows make it hard to forecast valuations and are likely introducing new risks into the market, says Vanguard founder Jack Bogle.
Bogle's 'reasonable expectations' for market returns
24/10/2017  The Vanguard founder sees 4 per cent returns for stocks and 3 per cent for bonds over the next decade. 
2 quality stock picks from Anton Tagliaferro
23/10/2017  Investors Mutual's Anton Tagliaferro looks at a couple of quality companies which he believes boast strong competitive advantages.
4 things to consider before selecting a LIC
19/10/2017  Listed Investment Companies are undergoing a resurgence for investors, and Geoff Wilson, CEO, Wilson Asset Management outlines why and what you should look out for.
Investing lessons from Hamish Douglass
10/10/2017  What individual investors can learn from Magellan's approach to stock selection, including considering first- and second-order beneficiaries of disruption and balancing risk against valuation.
Deeper demand driving these pooled investments
31/08/2017  Listed investment trusts are beginning to take off in Australia, but exactly what are they and how do they differ from listed investment companies and managed funds?
Earnings season FY17 mixed bag so far
18/08/2017  Aside from a few high-profile earnings guidance misses, large-cap stocks are doing okay as FY17 reporting season passes halfway, says AMP chief economist Shane Oliver.
Kerr Neilson on why global investment exposure is key
07/08/2017  There are two types of investors, regardless of market noise, imputation credits, diversification approaches and market indices, says the managing director of Platinum Asset Management.
Finding fixed income opportunities in new paradigm
02/08/2017  Slowing economic growth in the US and parts of Europe emphasises the need to carefully select credit opportunities, says Vincent Reinhart, chief economist, Standish Mellon Asset Management.
The home-truths of investing
12/07/2017  Look for companies that sit outside the cycle; heed the lessons of history; and remember the power of compounding, says Bennelong's Neale Goldston-Morris.
Investing to protect on the downside
30/06/2017  There are investment strategies you can adopt to mitigate volatility-linked fear and uncertainty in markets, explains Roy Maslen, chief investment officer – Australian equities, AllianceBernstein.
Don’t overdo benchmark consideration
28/06/2017  Being benchmark agnostic is the most effective approach to fixed income investing, according to Anujeet Sareen, portfolio manager, Brandywine Global.
Factor-based investing using ETFs
26/06/2017  Investors should consider style-exposures--such as value, defensive or yield-- they would like in their portfolios, explains Jonathan Shead, head of portfolio strategists – Asia Pacific, State Street Global Advisors.
Volatility plays to active manager strengths
22/06/2017  The climate of political volatility in the US holds important implications for investors and the funds they invest in, particularly around Donald Trump's ability to pass legislation through Congress, says PIMCO's Libby Cantrill.
3 pockets of opportunity in fixed income
07/06/2017  The head of PIMCO Australia gives his views on active management in fixed income and tells us where he sees most value in this space.
PIMCO Income Fund
07/06/2017  Morningstar's Tim Wong looks at the strengths and competitive advantages of this Silver-rated strategy.
PIMCO Global Credit Fund
07/06/2017  The PIMCO Global Credit strategy receives a Morningstar Analyst Rating of Silver due to its sizeable and highly capable credit research team.
Trump administration biggest macro threat for investors
05/06/2017  Even as European political volatility subsides, the US Government remains a considerable threat to financial markets, says Colleen Barbeau, director of equity portfolio management, Franklin Templeton.
Investors Mutual WS Future Leaders Fund
01/06/2017  Investors Mutual Future Leaders is a capable strategy focused on investing in Australian companies outside the top 50.
Antipodes Global Fund: Class P
01/06/2017  Antipodes constructs this portfolio based on three major objectives--capital preservation, inclusion of attractively priced businesses, and investment resilience.
Why PIMCO Australian Bond is a Gold-rated strategy
10/05/2017  Tim Wong explains why PIMCO Australian Bond is Morningstar's most highly rated fixed-interest strategy in this market.
Schroders stays hot on commodities, cooler on tech and defensives
01/05/2017  Long-term investors in Australian shares will continue to find value, but the time for risk-taking on more speculative plays has passed, says Martin Conlon, Schroders’ head of Australian equities.
No free lunch as fixed-income market shifts
07/04/2017  More difficult market conditions in a rising interest rate environment highlight the value of active management across your portfolio, says Simon Doyle, Schroders' head of fixed income and multi-asset.
The growing appeal of LICs
06/03/2017  The popularity of listed investment companies is on the rise once again, but there are several things investors need to be aware of before buying in, explains Michael Malseed, Morningstar senior analyst, manager research.