Barely 15 months after its foundation, LREM achieved a historic triumph in the National Assembly elections, winning 308 out of 577 seats, while Democratic Movement (MoDem), their partner in government, picked up another 42 seats, taking the total for the president to 350. "The result means the president will have the support of parliament to push forward his reform program, which should be supportive for the economy," CIO economist Dean Turner believes.
While low voter turnout (only 43 percent of voters participated) is a concern, with some commentators suggesting support for Macron is not as widespread as he would have hoped, the economist doesn't believe that this will derail Macron's project. "We expect the president to forge ahead with labor market reforms relatively soon, using executive powers where necessary to speed up the process," Turner notes.
Despite Macron currently riding on a wave of success, the new president is still likely to meet resistance at some point, especially from the labor unions and the left wing parties. "It is quite possible that France will be hit by strikes by year-end, as the unions seek to protect the positions of their members," the economist explains, adding that this could cause some disruption to the economy. "But we expect that the president will follow through with his program," he says.
Within the Tactical Asset Allocation (TAA) CIO remains overweight in Eurozone equities and underweight UK equities. Deteriorating economic data and falling commodity prices are likely to weigh on UK earnings as EU exit negotiations in Brussels get underway. Meanwhile, CIO thinks that markets are likely to refocus on good Eurozone economic data and improving earnings
growth.
(By UBS)
