After the US debate and ahead of the French elections - how the markets are changing

28.06.2024 15:21|Analyst Team, Conotoxia Ltd.

At the next intersection, we turn right - these are the words that come to mind when observing the events surrounding the elections in the world's major economies. Yesterday's debate between Joe Biden and Donald Trump can be summed up by the fact that as many as 67 per cent of those polled considered Trump to have won. Meanwhile, on the other side of the ocean, the first round of the French parliamentary elections will take place on Sunday, where, for the first time in many years, a far-right party could win. Let's consider what impact right-wing wins might have on markets in the future.

Table of contents:

    1. What impact will Biden's loss have on the markets?
    2. Right-wing France, and falling indices and a weakening euro

What impact will Biden's loss have on the markets?

The debate could be decisive for the presidency of Biden, who gave the impression of being lost and confused. According to observers, his answers on the economy and immigration were incomprehensible. The vast majority felt that Trump won the debate. However, we are not yet seeing any major turbulence on the financial markets because of this. The dollar remains strong, as do the US indices, which are hitting new historic highs week after week.

US500 chart

Source: Conotoxia MT5, US500, Daily

However, we did not hear any concrete proposals from either candidate about the future of the economy. Instead, we have witnessed numerous accusations and references to the achievements of governments that have already taken place. As a result, it is currently difficult to predict what decisions either candidate will make. Nevertheless, the market seems to be gently pricing in a potential Trump win.

chart who will win the election?

Source: Bloomberg

Right-wing France, and falling indices and a weakening euro

Investors have a completely different perception of a potential win for Marine Le Pen's National Rally, in France, which consistently enjoys the highest support of 35 per cent in recent polls. The coalition of left-wing groups can count on less than 30 per cent of the vote, while one in five respondents is a supporter of President Emmanuel Macron's centrist camp. The scale of the potential victory of the far right will probably only be possible to estimate after the second part of the vote, i.e. after 7 July, which means that political risks will also persist at the start of the new quarter.

The poll results have left the EUR/USD unable to break away from the 1.07 area. Uncertainty can also be seen on the Paris stock market. The main CAC40 index is down for the third consecutive session today. In the scenario of a decisive victory for National Rally, the pressure on the euro will intensify and EUR/USD could be heading towards the key barrier of 1.06. Traditionally, during episodes of political crises on the Old Continent, investors should flee to safe, defensive currencies, namely the franc and the dollar.

CAC40 chart

Source: Conotoxia MT5, F40, Daily

In such situations, it is also worth looking for opportunities because, according to the popular stock market adage 'buy the rumours, sell the facts', there may be some deadlock after the election, forcing both parties to look for coalition partners to form a government. Historically, such a situation has had a positive impact on equity markets as it significantly reduced regulatory risk. As a result, the CAC40 index may return to its upward trend after the election, especially as no significant business risks are currently visible.

 

Grzegorz Dróżdż, CAI MPW, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)

The above trade publication does not constitute an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No. 596/2014 of April 16, 2014. It has been prepared for informational purposes and should not form the basis for investment decisions. Neither the author of the publication nor Conotoxia Ltd. shall be liable for investment decisions made on the basis of the information contained herein. Copying or reproducing this publication without written permission from Conotoxia Ltd. is prohibited. Past performance is not a reliable indicator of future results.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71,48% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Like the article?
Share it with friends!


See also:

Jun 26, 2024 3:16 pm

EU is not ready for another gas crisis, warns European Court of Auditors

Jun 11, 2024 2:42 pm

New Texas stock exchange: changing the game in the US financial market

Jun 5, 2024 4:38 pm

Top 5 fastest-growing stock markets of 2024 - see what the future holds for them?

May 28, 2024 3:07 pm

What can we learn about investing from Oxford's eminent Polish financial mathematician?

May 24, 2024 11:13 am

ETF ETH ATH?

May 22, 2024 2:55 pm

Gold price at peaks. When will the rise end?

76.23% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76.23% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trading on CFDs is provided by Conotoxia Ltd. (CySEC no.336/17), which has the right to use the Conotoxia trademark.