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European Optimism Continues


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Monday, June 19th, 2017

Back when National Front leader Marine LePen failed to win the latest presidential election in France, American supporters of President Trump may have found themselves feeling some level of disappointment initially. After all, both candidates were thought of as upstarts to the status quo, and viewed favorably by those on the right of the political spectrum.

A win by LePen would have further put pressure on Eurozone stability, especially in the wake of the Brexit vote in the U.K., and a large part of the 2016 narrative in global politics rested on this "outré" perspective.

They need not have worried, as it turns out - at least those who also favor a strong investor class and open marketplace. New French President Emmanuel Macron is a former investment banker with Rothschild & Cie, who also worked as an officer for the Finance Ministry in France, just won a large majority for his fledgling party En Marche! yesterday, claiming 350 of 577 seats in French parliament.

Why is this a good thing? Let us count the ways: former President Francois Hollande's rather disastrous turn as Socialist party leader of the country has led to a minuscule 45 seats in parliament as of yesterday's vote; the radicalized National Front - which was actively interested in helping collapse the EU under LePen's leadership - only took 8 seats, relegating the destabilization null and void; and more relevant toward pro-market leadership, the Les Républicains party, notched 137 seats.

Taken together, we now foresee the EU working toward further stability as economies in the continental coalition grow stronger. This not only will help France - and by extension, other strong European countries like Germany - avoid the pitfalls currently associated with the U.K.'s Brexit, but will allow for a coordinated effort as threats like the destabilization of the NATO alliance and the potential influence of Vladimir Putin's Russia emerging.

Time will tell if this new administration in France is successful, or if will be mired in distrust the way the most recent investment-class President Nicolas Sarkozy's administration became. And, to be sure, terrorist attacks continuing in the EU and the U.K. are perpetual threats to stable societies, without much in view to curb these atrocities in the near-term. But at least we see more answers than questions in France today, looking forward. And we know how markets abhor an excess of questions.

The iShares - France ETF EWQ is currently a Zacks Rank #3 (Hold), but the Vanguard MSCI Europe ETF VGK carries a Zacks Rank #1 (Strong Buy).

Mark Vickery
Senior Editor

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , US Markets , Stocks
Referenced Symbols: EWQ , VGK


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