On the financial markets, LVMH’s performance does not cancel the stress brought on by the Macron-Le Pen duel

The turnover trend of the LVMH group impressed all analysts.

The turnover trend of the LVMH group impressed all analysts.

©ERIC PIERMONT / AFP

Atlantic Business

Financial markets are not shying away from LVMH’s excellent quarterly results, but remain very concerned about the duel between Emmanuel Macron and Marine Le Pen. Their concern mainly concerns programs that are incompatible with the international environment.

Financial markets do not like election periods because the effects are multiple and perverse. Before the first round, the polls were so tense that the financial markets were worried about a possible final duel between Marine Le Pen and Jean-Luc Mélenchon. For the business community, this would have been the worst case scenario.

In the aftermath of the first round, Emmanuel Macron’s arrival in the lead and the prospect of a return duel with Marine Le Pen would reassure them a little if not that, very quickly, everything changed.

The companies’ results for the first quarter turn out to be much better than they expected. The turnover trend of the LVMH group impressed all analysts. In a country threatened by chronic pessimism, the luxury, digital, agri-food and aeronautics industries, launched in 2022, have confirmed the prospect of sustained activity despite inflation and the closure of the Russian market .

That said, very quickly, since Wednesday, French financial circles realized that the second round campaign between Emmanuel Macron and Marine Le Pen was going to be very violent. and this daily superiority, to draw voters from the margins of the political market, would have transformed this second round into a festival of promises that would have been difficult to carry out either way.

On Macron’s side, therefore, the campaign team is once again very nervous. We know that the exercise will be more difficult than in the first five years. Having taken advantage of the image of the warlord at the beginning of the attack in Ukraine, after having managed the McKinsey affair more or less well, we realize that despite all the support or instructions to vote, the games are not played. .

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Financial markets are therefore very feverish. The price levels are generally still very high but there are many back and forth, because the hypothesis of seeing Marine Le Pen win is not excluded from the beginning. As a result, her program is looked at with a magnifying glass, and the idea of ​​financing tax cuts (VAT in particular) by abolishing immigrant benefits, or the folding of business in France seems implausible. But observers also recall that Donald Trump’s election in the US seemed implausible to them, that Brexit was considered madness, and even recall that populist experiments in Greece, Italy or Spain were not crowned with success.

The problem is that some French people notice that Marine Le Pen has softened in her plans and therefore they would be ready to live Le Pen. “At least we would be fixed. “

In short, the financial markets do not like this situation. We can see this on the bond market as rates have risen to 1.17%. Starting at nearly zero, this rate actually includes the risk premium. The interest rate differential (the spread) with Germany is 50 basis points, the highest level in 5 years.

On the stock market, the most exposed stocks are the most expensive, growing stocks (tech and luxury), whose prices regularly plummet despite their brilliant results and which would be penalized by this rate hike. Investors are regularly losing these stocks to face a risk they don’t control.

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What still disturbs the game is the score played by Emmanuel Macron at the beginning of this second round of the championship. To capture the voices of the far left, he also multiplies the promises and goes back to important reforms. The plan to reduce the retirement age from 65 to 64 to respond to Marine Le Pen’s proposal is a bad signal sent to her voters in the first round.

Tout cela fait très désordre pour des chefs d’entreprises ou des gérants de fonds qui doivent intégrer aussi tous les risques qui sont apparus avec la guerre en Ukraine, et notamment inflation sur l’énergie, les matières premières et les pénuries d ‘ supplying.

In short, if Marine Le Pen, which is the least probable hypothesis, the markets could suddenly collapse the next day with fairly strong speculations until the legislative elections that could also reserve some surprises.

The main risk of applying the Le Pen program is linked to the breaking of our ties with the international scene. Membership of Europe is obviously compromised because most of its projects are incompatible with the European Union code of good conduct, but it also breaks many ties with suppliers in emerging countries.

A victory by Emmanuel Macron leads to the maintenance of the status quo and brings back the structural concerns of investors such as inflation, the war in Ukraine and the tensions within the European Union that can also crystallize on the management of the European Central Bank.

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