WeeklyWatch – Ça alors! French voting begins

2nd July 2024

Stock Take

France takes centre stage – and not just in the football…

As France marches on to the quarter finals in their Euros campaign, there’s been added excitement to the other major contest – the one being held in the political arena.

While France’s Euros campaign has been far from plain sailing, the first round of the national election votes saw the biggest turnout of voters since the 1990s. Three deeply ideologically opposed parties are fighting for the 577 available seats.

The right-wing National Rally (RN), led by Marine Le Pen, seems to have taken the first-round victory by successfully winning around a third of the votes. The new left-wing alliance party, New Popular Front, won 28% of the vote and the current ruling coalition party led by Macron, Ensemble, secured just over 20%, putting them in third place.

The second round of votes will take place for the candidates who won 12.5–50% of the votes in their constituency. With a large number of seats still to be claimed by the three main parties, there’s an opportunity for Macron’s party and the New Popular Front to make a deal to prevent an RN majority.

Diversification softens the path for investors

Short-term uncertainty is the main outcome of the French election so far for investors, and until the winner is declared, the long-term impact will remain unknown. But no matter the result, the French equities market is made up of mainly international companies. Amundi reports that over 80% of sales come from abroad.

The Group CIO at Amundi, Vincent Mortier, stated:

“Sectors with higher domestic exposure and greater sensitivity to political uncertainty have been affected the most. This is the case of more regulated sectors, such as utilities and infrastructure, as the market weighs the risks related to potential privatisation, nationalisation or revision of contracts. Financials are also vulnerable to uncertainty, notably because banks are major holders of government bonds. The market is also pricing risks related to potential changes in taxation. However, large French banks are well capitalised, have diversified business models and already trade at a discount to the European banking sector and their long-term average.”

A last-minute winner for Sunak in the UK election?

If you thought that the French football team were in poor form this Euros tournament, then England take it one step further having even lulled some to sleep with their lacklustre performances! And yet, they’ve made it to the quarter finals courtesy of Jude Bellingham’s last-minute miracle goal and a hasty victory clencher in extra time by captain Harry Kane.

Needless to say, UK Prime Minister Rishi Sunak is hoping for a similar stroke of luck as more and more polls reveal that Labour are on course for clenching a large majority in the UK election that takes place later this week.

The Chief Investment Officer at BlueBay, Mark Dowding, notes:

“The upcoming election in the UK has been long decided. Without there being much of a contest, the upcoming vote on 4th July seems to be generating about as much excitement as the country’s football team, with this seeming to send most people to sleep.”

The USA – leadership frailty vs wavering finances

After an impressive run in the previous week, the S&P 500 and NASDAQ continued to build on this, trading at record highs. However, some falls on Friday took a little bit of the wind out of their sails.

But all eyes were on the US presidential debate where there were big concerns over Joe Biden, who appeared to lose track of what he was saying on several occasions during the debate. This has consequently prompted more questions about his fitness to lead due to his age. The election doesn’t take place until November and there’s still no clear favourite at this stage.

But any uncertainty that’s being felt in the political arena is certainly not being felt by AI-driven optimism that continues to grow as the country dominates in its position of being the world’s largest economy.

Amundi and BlueBay are fund managers for St. James’s Place.

Wealth Check

‘Showing your age’ alters the financial status quo

Middle aged? Then you must be 60 or over! The population is living for longer, and by 2034, more than one million UK families could have multiple generations living their retirement out at the same time. This is a 32% increase on the current figures of 813,000.1

Family wealth and financial well-being often pivot around inheritances. They can be life-changing, offering large sums of money that allow families to pay off mortgages or put money aside for their children’s education. But as lifespans increase, it means that there’s less family for the upcoming generations to access.

Senior Propositions Manager at St. James’s Place Tony Clark says:

“You’re more likely to inherit in your sixties now. By that age, you may be mortgage-free, or even retired yourself. So, the question is, do you really need the money? Would it be better spent helping younger family members who are struggling with mortgage payments or paying nursery or school fees? Or could it help elderly relatives shoulder the huge cost burden of long-term care?”

Five questions to address if you’re part of a multi-retiree family

  1. Should an inheritance skip a generation, and can the family reach an agreement on who should get what and when?
  2. Has there been a family discussion regarding the potential long-term care of multiple generations? Is anyone able to help out? How will costs be covered? Social care is not something many consider saving for, but it’s likely that it will be required.
  3. If you’re part of a blended family that has more than one generation in retirement, how much thought have you given to passing money on to grandchildren from previous relationships in a way that’s fair and tax efficient? Have current Wills or Death in Service benefits been modified to reflect your wishes?
  4. Are there powers of attorney in place for your family members? Many don’t think about putting this financial safeguard into practice until they’ve retired. A power of attorney could be required at any age, even if their business is only needed temporarily.
  5. Are your finances as tax efficient as possible? The more you utilise your allowances, the less tax you may pay, and your money could last longer.

If you think you need to make some changes to your financial plans, or put new ones in place, contact us today.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

Will writing and Powers of Attorney involve the referral to a service that is separate and distinct to those offered by St. James’s Place and are not regulated by the Financial Conduct Authority.

1Research conducted for St. James’s Place by Opinium, among 4,000 UK adults between 27th February and 8th March 2024. All results are weighted to nationally representative criteria. Estimating the number of families with multiple retired generations relies on looking at the age of children of the eldest age groups and projecting how changing demographics will impact these figures. We know approximately how many older age groups have a child aged 65 and above currently, and we have applied those percentages to the ONS projections of increased numbers of adults aged 80–89 and 90+, to ascertain future numbers of families with more than one generation in retirement.

In the Picture

Despite having a way to go, we’ve achieved a big reduction in our investment carbon footprint over the last few years. To find out more about the carbon data of your investments, read our TCFD Product Report here.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

The Last Word

“Not a single vote must go to the National Rally. France does not deserve that.”

– Gabriel Attal, French Prime Minister, saying his party will do whatever it takes to prevent RN from gaining control of Parliament.

The information contained is correct as at the date of the article. The information contained does not constitute investment advice and is not intended to state, indicate or imply that current or past results are indicative of future results or expectations. Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’s Place.

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Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, endorsed, reviewed or produced by MSCI. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.

 

SJP approved: 01/07/2024