Macron storms to victory

Ian Ormiston, European smaller companies fund manager at Old Mutual Global Investors, looks at the prospects for French companies under Emmanuel Macron’s stewardship.

The largest political bogeyman of 2017 has been laid to rest following Emmanuel Macron’s French presidential run-off victory over Marine Le Pen. This feat by the 39-year-old political novice, whose En Marche! party was only launched last year, is an incredible one.

Macron’s rise is remarkable enough but the shift in parliament is even more dramatic. Polls published last Thursday suggest the En Marche! movement could win 249 to 286 seats in the 577-seat national assembly. While this would not result in a majority, it is well ahead of the centrist and conservative parties with 200-210 seats, the National Front with 15 to 25 seats and the Socialists with 28 to 43 seats. In the current parliament the Socialists have 280 seats; they have endured quite some fall from grace.

What impact will a Macron presidency have on the French economy? He seems to be a pragmatic centrist who should have the support of parliament to pass pro-growth reforms. Meanwhile, his pro-Europe stance will be important as the EU reformulates itself with the UK outside its borders, and we expect France to seek to set the agenda when it comes to EU and eurozone reforms.

In terms of our French holdings, we are likely to take some profits following the recent bout of market strength. As always, we seek to invest in companies where as much of the investment case as possible lies in the hands of the company management, whether it be through a growth agenda, acquisitions or cost-cutting. Macroeconomics is never our main reason for investing in a company so while we welcome any improvement in growth potential in France, we do not expect it to be a stand-out contributor to returns in 2017.