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French Election Soothes Sentiments: ETFs Likely to Benefit

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Proving most of the polls correct, Euro zone's second largest economy – France – has chosen Centrist candidate Emmanuel Macron as its president in a run-off election. Macron battled it out against far-right candidate Marine Le Pen.

Macron had a sweeping victory with about 66.1% votes while 33.9% votes went to Le Pen’s kitty. Over 50% of votes are required to form government in France. With this, France followed the footsteps of Dutch and discarded populism. In March, Geert Wilders – Netherlands’ far-right populist candidate – also failed to see success in election.

Since Macron is viewed as a business-friendly leader, a loyal ally of the European Union and supporter of immigration and LGBTQ rights, the market is expected to surge in the coming days. The euro too is expected to gain ahead as Macron is a follower of the EU unlike Le Pen who is in favor of ‘Frexit’.

Quite expectedly, the global market will now stage a relief rally as the slight concern of an-establishment movement in the nation is now over. The euro already is at a six-month high against the greenback.

However, euro lost some of its strength later on uncertainties pertaining to the ability of Macron’s newly-formed party to win a parliamentary majority in June legislative elections, as per Reuters. Any failure in June would point at Macron’s shortcoming in passing his government’s policies in the parliament, as per some analysts.

ETF Impact

Whatever the case, there will likely be a sense of optimism in the market in the coming days. This is because the European Union is apparently winning every political crisis and the region is economically on the mend (read: Do Europe ETFs Have More Upside?).

Germany’s chancellor Angela Merkel's conservatives also emerged winner in a vote in the country’s northern state of Schleswig-Holstein on Sunday, strengthening her chances of victory in the national election in September, going by an article published on Reuters.

In the coming days, we are likely to see an uptrend in ETFs like iShares MSCI France ETF (EWQ - Free Report) , CurrencyShares Euro Trust (FXE - Free Report) , iShares MSCI Eurozone ETF (EZU - Free Report) , Vanguard FTSE Europe ETF (VGK - Free Report) and European financial ETF iShares MSCI Europe Financials (EUFN - Free Report) , if economic conditions remain stable. Foreseeing Macron’s victory, all these ETFs saw an uptrend prior to the May 7 election.

Investors should also note that country ETFs like iShares MSCI Italy Capped (EWI - Free Report) and Global X MSCI Greece ETF (GREK - Free Report) are most likely to gain in the coming days as these highly indebted countries are hoping that centrist Macron’s victory will also help them tackle their populist parties that continue to criticize EU-imposed austerity and free migration policies, as per the source (read: 5 European ETFs Soaring on French Election Results).

Going forward, no changes in the existing global economic set-up (as of now) will likely benefit all-world ETF iShares MSCI ACWI ACWI and key U.S. ETFs like SPDR S&P 500 ETF (SPY - Free Report)  too (read: Join Eurozone Rally with These ETFs).

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