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The Third Shoe May Drop in France
Stories are creeping into the press to suggest that a La Pen win in France [bloomberg.com] is now quite likely, but will be every bit as big of a surprise as Brexit and the election of Donald Trump.
What's more: the Market has not yet "priced this in".
That’s the conclusion drawn by Charles Gave, founder of Hong-Kong based asset-allocation consultancy GaveKal Research, who predicted the triumph of Donald Trump in the U.S. election, and is now betting on a win for the anti-euro National Front candidate.
“Le Pen’s momentum is a slow-moving reaction against the men of Davos -- as we have seen with Brexit and Trump -- but markets don’t want to believe it,” he said by phone before the first round of the French poll on April 23.
The story here isn't that La Pen increasingly appears to be a shoe in for April vote, and may also win the runoff election in May.
The real story is that the investment World is still betting on the status quo, in spite of the fact that they have bet wrong twice in a row.
By not pricing in the possibility of a Le Pen win (which Gave thinks is more likely every day), the markets are setting up a situation where they would be forced to suddenly price this in after the election when the euro would be tanking, and the EU might be facing dissolution.
By failing to manage assets ahead of the election, Charles Gave' company [gavekal.com] is predicting worse financial turmoil afterwards.
