The results from yesterday’s final round of snap parliamentary elections in France shocked many as the New Popular Front (“NPF”) won the largest number of seats, leaving Macron’s centrist camp and Le Pen’s far right in the dust. Tactical voting kept the National Rally out of power and ushered in a shock victory for the NPF. The staggering result ultimately means the country now has no clear candidate for prime minister.
Many are wondering what changes to fiscal policy could be made and how they may impact markets. It really depends on how the coalition will look moving forward as this leftist alliance of Socialists, Greens, Communists and Jean-Luc Mélenchon’s France Unbowed are not in agreement on many key issues. What they have promised is to roll back Macron’s pension and immigration reforms as well as cap basic goods to combat the cost-of-living crisis. The country is now at the beginning of an intense negotiation period to define how the coalition will be formed. The lack of clarity about who will actually be in charge and whether they will be pro-market or not has resulted in some choppy market moves – as uncertainty often does.
Things can only get better?
The dramatic results in France are in stark contrast to a rather dull and predictable election last week in Britain. The UK waved goodbye to 14 years of Conservative power and gave Labour a sweeping but lukewarm victory. The elections do have one thing in common though – both were decided by people knowing what they didn’t want. In the UK, that meant Conservatives out but with little enthusiasm for Labour in charge. This is not a story of Britain lurching to the left, it is more than that - globally, populations are becoming more disillusioned and sceptical of governments’ ability to deliver.
This is visible in the results across the Irish Sea as the Republican party Sinn Féin now hold the most Westminster seats in the North of Ireland. The eagerness for change is clear and Starmer at the helm with senior figures linked to Ireland will likely bring conversations of a united nation to the forefront.
Voters have made it abundantly clear they want change and all eyes will be on Starmer to deliver. His first speech as prime minister on Friday spoke of a reset, rediscovery and the urgent work that must be done. The reality is that the levers of government are slow to take effect. Any decisions made over the coming months won’t be fruitful for many years. This begs the question of how much can be accomplished in a five-year term.
Take two?
Across the pond in the US, we have four months until we see how the election plays out. In 2016, the world was shocked by Trump’s victory and this time, with looming question marks over Biden’s participation in the race altogether, Trump will be raring to go. A Trump presidency during a period of global conflict and uncertainty would likely bring change of some sort or, at the very least, lots of red-faced shouting – but in what direction and with what effect is anyone’s guess.
While Labour promises change is coming, Trump swears he will make America great again (again), Biden promises to save democracy, and Putin and Xi have their own agendas. So, where does that leave us? Don’t let the glossy (and maybe a decade-old) LinkedIn photos fool you; for many in the team this is far from their first rodeo, with careers spanning shock elections, wars, coups, terrorist attacks and various market crises. It is worth remembering the old French adage “plus ça change, plus c'est la même chose”. We will continue to navigate volatility as we always have, focusing on long-term structural trends that will continue to shape the world for the coming decades.
Have a good week.
