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Market Viewpoints

"A great many people think they are thinking when they are merely rearranging their prejudices."

Marine Le Pen has set out her stall for the French Presidential election in April. Her “Free France” manifesto begins with a pledge to restore full sovereign control over the currency, the economy, laws, and the territory. Le Pen is the insurgent candidate and the two-round ballot election is her biggest hurdle to the prize she covets – the Presidency. Nearly the whole of the French establishment on the Left and on the Right unquestionably accept the European Union (EU) as France’s historic destiny. The Front National’s denunciation of the EU, therefore, makes it the shibboleth of progressive values. So to the important question, can she win? I say, yes she can. Le Pen’s second-round polling support has been rising in recent months, causing the financial markets to step back and take notice. Europe’s periphery debt market has welcomed a new member – France! President Trump plans to send to Congress an outline for a comprehensive plan to overhaul the tax code for individuals and businesses by the end of this month . If we go by his campaign promises, small and medium size enterprises will likely get a reduction in taxes and regulatory burdens. This will be positive for US growth and in turn for the markets. I recommend that you remain long risk and overweight US equities. There is a low risk of a US recession over the next 12 months and even a modest pick up in nominal growth should push global earnings higher. I do not expect a rate rise at the March Federal Reserve meeting. Present conditions don’t warrant it. I, however, do believe that President Trump’s policies are going to be reflationary and that they will bring the Fed into action. We will see it raise rates at least three times this year, with all three hikes coming in the second half of 2017.

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