The company said Mr Macron’s success in the first round of the election, which occurred on Sunday, 23 April, should lead to “a material reduction in perceived political risk in Europe”, though some risk premium will remain in the market until the legislative elections are held in June.
“Business-friendly and pro-European Macron, who has maintained a large winning margin in head-to-head polls with Le Pen, can now build on his momentum,” BlackRock Investment Institute said.
“Other candidates on both the left and right said they would vote for Macron while issuing strong statements against [Ms Le Pen’s party] the National Front.”
The company said the reduced risk level will allow equity investors to now focus on improved growth in the eurozone following Sunday’s result, and that French bonds are likely to recover relative to their German counterparts.
“We are underweight European fixed income due to risks that the improving economic outlook will spur higher bond yields and wider spreads on investment-grade corporate bonds – especially if markets sense the European Central Bank is moving toward winding back its asset purchases,” BlackRock Investment Institute said.
Franklin Templeton head of European fixed income David Zahn, however, cautioned that both Mr Macron and Ms Le Pen will have limited options available to them as president given neither candidate has a large amount of parliamentary support.
“Indeed, Macron has no representatives in Parliament and would have to build an entire array of candidates. Of course, he may get some defections from other parties, but we think that the parliamentary elections in June will now become an importance focus,” Mr Zahn said.
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