“Political uncertainty can amplify short term market movements. However, markets tend to recover once the political situation clarifies and the focus comes back to corporate earnings.”
- French markets mildly suffered after the announcement of elections amid high political uncertainty.
- Uncertainty will fade once the political situation clarifies, just as it has in similar election phases.
- After the recent movement, sound global French companies could offer opportunities for long term investors.
After the snap election call, the French equity market has underperformed the European one, but it has shown recent stabilisation and remains positive year to date. The spread between French government bond yields and the German Bund has widened, but it is also stabilising in recent days.
Markets dislike political uncertainty and closely monitor public finance developments. Sectors more sensitive to political risk, such as Financials and Utilities, are most affected, while Consumer Staples and Healthcare have remained resilient. As the French market consists mainly of international companies, with over 80% of sales coming from outside France, its behaviour should align with international equities once political uncertainty diminishes.
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