Topic/Theme Reports

Country Risk Chat: Foraging for Trump Truffles in France

Scott MacDonald PhD

March 1, 2017


Our contributing Country Risk Analyst, Dr. Scott MacDonald has been the “galloping gourmand” of fine French dining in the Bordeaux region as he samples the latest harvest of black truffles with his trusty nose pour vin, de la viande, du fromage et du pain.

Dr. Scott still has time for more professional activities as he also forages information from his friends, family and acquaintances along the French countryside and major metro areas, like Paris. His informal survey has taken the pulse of the political season in France and provides useful background intelligence on the possible populist revolt emerging on to the scene in-line with the Trump revolution in the USA.

Below are Dr. Scott’s impressions of the Trump-inspired political truffle season that is ending up as quite a tussle for power.

·   Although there are enough people to put Le Pen in front, nobody I spoke to liked Le Pen or had any intention to vote for her.  I stick to my earlier view that round one goes to Le Pen and Macron, Round two goes to Macron.


·   What could change this is another major Islamic attack.  People have a worry over this and it would feed into support for Le Pen.  This would only magnify worries built-up by earlier radical Islamic attacks that have hit the country.


·   There is an outside possibility of the left falling more behind Hamon, the Socialist. If he would win, even conservatives would probably vote for him over Le Pen, but Hamon would be a disaster for the French economy.  Macron would probably be a good decision for France as his programs (at least as in his platform) are more market-driven and would reduce the role of the state in the economy. The same could be said for Francis Fillion, the conservative candidate, who is currently dragged down by a scandal involving questionable payments of salaries to his wife and two of his children by the government.


·   Unlike past elections, 2017 is something that French people are deeply concerned about. They saw what happened with Trump and Brexit and are concerned that it could happen in their own country.


·   What does all of this mean for markets - volatility through the next several months for French sovereign and bank bonds and a sharp difference between them and German bonds (as a safe harbor).  It also holds up the US, despite major questions over economic policy, as a safe harbor.  Investors are also finding Swedish, Danish and Norwegian bonds as more attractive despite questions over oil prices (Norway) and the state of Danish and Swedish real estate markets. Real GDP growth in those three countries is relatively strong, public sector debt levels are low and unemployment is falling.  France remains the main focus of investor nervousness, but the Dutch elections take place on March 23rd and the populist far right is expected to win the largest number of votes, but probably cannot form a majority government.  The populist surge in Europe will remain a disruptive force for markets, though governments are likely to remain in the hands of more moderate, traditional pro-EU parties (with the possible exception being Italy).

The information and opinions presented herein are provided to you for information purposes only and are not to be used or considered as an offer or solicitation of an offer to buy or sell securities or other financial instruments. Our advice is intended to assist institutions with their risk management requirements.  We are not providing any investment advice. For example, we have not taken any steps to ensure that the securities referred to above are suitable for any particular investor and nothing herein constitutes investment, legal, accounting or tax advice. This material includes general information that does not take into account your individual circumstance, financial situation or needs, nor does it represent a personal recommendation to you. Information and opinions presented herein have been obtained or derived from sources believed by us to be reliable, but we make no representation as to their accuracy, authority, usefulness, reliability, timeliness or completeness. We accept no liability for loss arising from the use of the information and we make no warranty as to results that may be obtained from the information presented. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information and opinions contained herein reflect a judgment at its original date of publication by us and are subject to change without notice. We may have and may in the future update this material with information that is inconsistent with, and reach different conclusions from, the information presented herein.

Reports and information are intended for distribution to professional and institutional investor customers only. Recipients who are not professionals or institutional investors should seek the advice of their independent financial advisor prior to making any investment decision or for any necessary explanation of its contents. None of the contents, nor any copy of it, may be altered in any way, copied, or distributed or transmitted to any other party without our prior express written consent.

©2017 Viola Risk Advisors, LLC. All rights reserved.