Buy France, sell Germany

There are times when it could pay to be bullish on France and bearish on Germany. But this is one of them.

Andrew Van Sickle
By
published

There are times when it could pay to be bullish on France and bearish on Germany, says Charles Gave in a Gavekal Research daily note. This is one of them. If the self-proclaimed Thatcherite Franois Fillon wins the French presidency, there should be scope for "a handsome rally" in French equities, at least compared with German ones, as the prospect of an improving business environment boosts confidence. The centrist independent candidate Emmanuel Macron has good reformist credentials, as we pointed out last week by French standards at least. So he could also spark a bull run.

Conversely, says Gave, if the far-right or far-left candidate wins he reckons the odds are 50% on this and the euro heads towards break up, the newly reintroduced franc will tank, giving the profits of the multinationals that dominate the blue-chip CAC 40 index a major boost. That would lead to "a fabulous" bull market in local currency terms. The "Frexit" scenario also implies that a new German currency would soar, throttling the earnings of the local stockmarket's heavyweight exporters and sending equities sharply lower.

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Andrew Van Sickle
Andrew Van Sickle

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.

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