60 seconds on Macron's market impact
Emmanuel Macron's victory in the French presidential election over the weekend is a clear positive for European equities.
Fears had been rising that we would see a victory for Marine Le Pen and that, as a result, the eurozone would break up.
However, we can now put these fears aside and focus on underlying economic growth in the European market. The last couple of years have seen strength in the service side of the economy and this has now been joined by the manufacturing side. This is a great positive for the market as this combines the possibility of growth with greater capital expenditure spending and greater job creation. This then feeds back in on itself within the market.
Valuations are also incredibly attractive in European equities. While headline levels have risen slightly in the last couple of months, they still remain very attractive, particularly relative to the US.
These attractive valuations are now combined with the best earnings season we’ve seen in seven years, providing real hope for ongoing strength in the European equity market.
Hopefully, we can now see positive inflows into the European market. Last year was clearly a very tough year with significant outflows; however, since the first round of the French election, there have been significant inflows into the market and we would expect this to continue.
So, inexpensive valuations combined with earnings momentum provide a strong backdrop for the European equity market.
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