by Ivan Martchev
July 9, 2024
As I write, on Sunday, it is still unclear what the final tally will be from the second round of voting in the French parliamentary election. Yet, there are enough votes counted so far to determine that the nationalist National Rally, which led in the first round of voting, will likely come in third when all is said and done.
According to early results, as reported by CNN on Sunday evening, the second poll reversed the first one:
“In a surprise result, the New Popular Front (NPF) – a cluster of several parties ranging from the far-left France Unbowed party to the more moderate Socialists and the Ecologists – won 182 seats in the National Assembly, making it the largest group but well short of the 289 required for an absolute majority. Macron’s centrist Ensemble alliance won 163 seats, and Marine Le Pen’s far-right National Rally (RN) party and its allies won 143 seats.”
This is a very different outcome compared to the European parliament elections and the first round of voting, which showed the National Rally coming in first. I am not sure how these two rounds of voting systems work, but clearly the result can change dramatically from one round of voting to the next.
Even though Emmanuel Macron’s party is coming in second, I think he would rather deal with a leftist alliance that is pro-Europe than deal with the National Rally party. After all, he was a member of the French Socialist party 20 years ago before he became an investment banker for Rothschild.
My guess is that the French stock market will rally and close some of that horrendous gap that it had opened with the German DAX since May, and that the EU would also be strengthened by the election outcomes both in France and the UK, which also saw a landslide victory for the British Labour Party on July 4th. Britain may no longer be in the EU, but its new Prime Minister Sir Keir Starmer campaigned against Brexit, which the majority of Britons now regret, and they sure are acting it out at the polls. The comparison of the old Parliament composition (top) and the new one after July 4 (bottom) is astounding.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Britain will surely seek closer ties with the EU under Starmer, since Brexit had badly damaged the environment for British businesses. If you asked Britons if they are faring better after Brexit, I don’t believe they would answer in the affirmative, as the result of the parliamentary election shows.
Some type of a relief rally in the euro is coming, as well, as tightening of the Franco-German bond spread, which had been putting pressure on European stock benchmarks.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
In the U.S., the S&P 500 Index had four up days last week on normally low holiday volumes, while the S&P 500 Equal Weight Index, with the same identical components but weighted equally rather than by market-cap, had two down days and two up days. It is like looking at two completely different indexes.
Advancing on narrow or negative breadth is not an immediate reason for a selloff, but it is a worrisome sign. The average stock is down, while the tech sector is pulling the stock market higher. We saw the same dynamic for two years before the stock market peaked in March 2000. No, the stock market is not in a bubble like it was in 2000, and there are massive sales and earnings that support today’s tech prices but given the choice of the broad market rallying and only tech rallying, the former choice is always better.
All content above represents the opinion of Ivan Martchev of Navellier & Associates, Inc.
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Ivan Martchev
INVESTMENT STRATEGIST
Ivan Martchev is an investment strategist with Navellier. Previously, Ivan served as editorial director at InvestorPlace Media. Ivan was editor of Louis Rukeyser’s Mutual Funds and associate editor of Personal Finance. Ivan is also co-author of The Silk Road to Riches (Financial Times Press). The book provided analysis of geopolitical issues and investment strategy in natural resources and emerging markets with an emphasis on Asia. The book also correctly predicted the collapse in the U.S. real estate market, the rise of precious metals, and the resulting increased investor interest in emerging markets. Ivan’s commentaries have been published by MSNBC, The Motley Fool, MarketWatch, and others. All content of “Global Mail” represents the opinion of Ivan Martchev
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