Investors: Watch These 4 Charts After The French Elections

The topic of this week has been the French elections. Everyone is watching the French elections results as if they will change the world, in an emotional rather than rational way. Let’s look at some examples in financial media to illustrate what we are saying.

This MoneyControl article stresses the importance of the French election on the economy and markets: “Global investors and markets are all focused on the crucial French elections – the voters on Sunday will heading to the polls to choose their next president. The election of the president is very crucial for the Eurozone economy overall.” (our emphasis)

CNBC agrees that the French election has a significant impact on markets: “Sunday will see French voters cast their ballots in the first round of their presidential election. The race is seen as too close to call, and could have a wide-ranging impact depending on the result.” (our emphasis)

Financial Times, however, looks at it in a more actionnable way, which is a big difference compared to the ‘vague’ statements on many other outlets. This is how FT forecasts a potential outcome of the French election on markets: “Should we see this outcome, it would be positive for markets, with the euro rallying and the spread on French over German bonds likely to fall.”

The way to look at markets in the context of the French election

The way InvestingHaven looks at markets is very simple: where exactly are key markets trading before the outcome, and how far away are they from secular trend changes. That is the key question to ask, and look answers on.

Let’s revise leading assets in Europe: Yields in Germany, the Euro, French stocks, European stocks. 4 charts are included in this article.

The highlights of these 4 charts for different election outcomes: In case of not too concerning results of the French election, French stocks will see a major breakout (very, very bullish), the Euro will rise slightly, and yields will breakout to break the very long term downtrend (major news). In case of a concerning outcome of the French election, stocks will simply correct with no visible impact short to medium term, the Euro will correct (close to breakdown), and yields will simply go lower (with no significant impact).