The second round of the French elections has resulted in a hung parliament, with no group able to claim a majority. 

In this special report, we discuss three possible political scenarios and their investment implications.  None of these scenarios is likely to unfold quickly, and market volatility is possible as the political negotiations unfold.  Bond markets will remain a particular focus, especially given the European Commission's efforts to contain national budget deficits. The final shape of the next French government will also have an impact on the euro and equities, and we discuss the outlook for European banks and small caps. Given lower entry points, this could provide an opportunity to rebalance portfolios.

 

 

Key takeaways:

  • Contrary to market expectations, the second round of the snap elections resulted in a hung parliament. While the left-wing coalition gained 182 out of 577 seats, President Emmanuel Macron’s centrists came in second with 168 seats, and the right-wing coalition around Marine Le Pen winning 143 seats being in third place. The next weeks are expected to be dominated by negotiations to form a stable government.
  • European markets opened slightly lower as political uncertainty weighed on investors' risk appetite. However, as they began to put more emphasis on the hung parliament reducing the likelihood of a large policy change, markets rebounded.
  • While market volatility is likely to remain high in the coming weeks, investors could take advantage of the current, in some cases significantly lower, entry levels for European assets to gradually recalibrate their portfolios.

'

The CIO Special below is available to download. Please refer to the Important Information at the end of the memo for disclosures and risk warnings.

PDF

Language:

In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved. Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Performance refers to a nominal value based on price gains/losses and does not take into account inflation. Inflation will have a negative impact on the purchasing power of this nominal monetary value. Depending on the current level of inflation, this may lead to a real loss in value, even if the nominal performance of the investment is positive. Investments come with risk. The value of an investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.

Change of name: As part of Deutsche Bank’s Private Bank, the former International Private Bank also adopted this title on July 20, 2023.

The content and materials on this website may be considered Marketing Material. The market price of an investment can fall as well as rise and you might not get back the amount originally invested.  >The products, services, information and/or materials contained within these web pages may not be available for residents of certain jurisdictions. Please consider the sales restrictions relating to the products or services in question for further information. Deutsche Bank does not give tax or legal advice; prospective investors should seek advice from their own tax advisers and/or lawyers before entering into any investment.