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May 7th French presidential runoff and the commodity markets

Bobby Coats and Bert Greenwalt attend Ag council of Arkansas meeting
Bobby Coats and Bert Greenwalt, agricultural economists with the University of Arkansas and Arkansas State University, catch up at the Agricultural Council of Arkansas annual meeting in Little Rock.
French presidential runoff shaping up to be major influence on world financial and commodity markets.

For the week beginning May 1, 2017 the biggest potential “Event Risk” facing markets is a Marine Le Pen of the National Front political party victory over Emmanuel Macron of the newly-established On the Move! political party in the French presidential runoff on May 7. Both candidates have ridden the populist movement wave upsetting traditional French party establishments.

Major market considerations the week of May 1 fall into three categories:

  • First, pre-election what to expect the week before the French Presidential election May 7, 2017.
  • Second, what to expect with a Marine Le Pen of the National Front political party French presidential win.
  • Third, what to expect with an Emmanuel Macron On the Move! political party win.

French Presidential Elections Could Prove Anti-Climax As Voters Abandon In Disgust, Forbes by Marcel Michelson

Can Le Pen beat Macron in the French election, despite losing in the first round? The Telegraph By Ashley Kirk  Patrick Scott and David Chazan, April 30

Can Emmanuel Macron solve France's economic riddle? The Guardian by Larry Elliott

What to expect from the markets this week:

Global market participants enter the week assuming a likely Macron victory, which would imply that global markets resume last week’s bullish global equity dynamics and lackluster commodity trading activity. Given most bearish global commodity fundamentals it is absolutely imperative for global equity prices to reach a level sufficiently strong to generate lift in commodity prices for one of several reasons. (To see this week’s market charts, click on

Market “Near Term” Snap Shot

  • U.S. Bonds: Slightly Bearish – Rising Yield
  • Domestic Equities: Mostly Near Term Bullish
  • Global Equities: Some Consolidating Gains, While Others Near Term Bullish
  • U.S. Dollar: Sideways - More Weakness Than Strength
  • Commodity Index: Searching for a Bottom, Caution Advised 
  • Oil: Dangerously Weak
  • Soybeans, Corn and Wheat: Basing Continues - Bullish Bias
  • Rice: Neutral
  • Cotton: 84-cent Price Objective Remains


Market Impacts Le Pen Victory

A surprise win by Le Pen on May 7 would create a huge amount of “MARKET UNCERTAINTY and ANEXITY,” since the 48-year old Le Pen represents an orderly exit from the European Union and the economic limitations of heavy socialism. Le Pen would re-embrace France’s global identity and leadership role, including closer ties with the United States and the United Kingdom. Under this scenario market participants should expect for the week beginning May 7, 2017 the following:

  • Euro weakness and U.S. Dollar Strength
  • S. 10-year Treasury Yields lower or bullish
  • Many U.S. and European equity markets lower
  • Oil-price softness due to demand uncertainties
  • Likely rice, cotton and grain price weakness for the week

The first round of pain as France moves toward a potentially bright economic future.   

Market Impacts Macron Win

Given a win the 39-year old Macron would be France’s youngest President. Both Macron and Le Pen represent populist’s candidates defeating the country’s “Old Guard French Political Elite Republican and Socialist Parties.

That said, Macron is the hands-down favorite of the French political and market participant elite, as well as their global counterparts. Macron will be a young version of the old guard establishment, super pro-European Union and the Euro, enhancing the French Heavy Socialist Platform. Under this scenario market participants should expect for the week beginning May 7, 2017 the following.  

  • Euro strength and U.S. Dollar weakness for a period, which would be good for the reflation trade  
  • U.S. 10-year Treasury Yields likely rise or bearish
  • Many U.S. and European Equities higher, with like effect on global equities
  • Oil price firmness
  • Cotton and grain price firmness with neutral rice prices


The political elite and market participants expect a Macron victory on May 7, 2017, which is a vote for the continued membership in the European Union and the Euro; a progressive, advanced level of socialism; and financial repression and an accelerated move toward debt paralysis and economic collapse.

That said, near term this would likely be the best scenario for the reflation trade and potential bullish price activity for domestic and global equity and commodity markets for the remainder of the year.  

A vote for Le Pen is a vote for the progressive capitalist, the future of France with the French identity recognized globally, an exit from the European Union and the Euro, closer U.S. and United Kingdom ties, and  resuming their global leadership role, etc.

  • The impact on global equity and commodity markets would likely be very bearish for one to four weeks.
  • A Le Pen lose would likely guarantee her a victory in the next French presidential election in 2022, if not before.

Finally, a Macron victory may be followed by global market activity characteristic of buying the rumor and selling the news with premarket activity following the May 7 French presidential elections. 

Sidebar Consideration: Future Military Event to Consider

North Korea can no longer be held at arm’s length. This dictator will have to be neutralized as he presents a very real and most dangerous threat to the U.S. and global community.

In addition to the following “Near Term Market Summary Considerations Week Beginning May 1, 2017.” To view the charts for this analysis, click on

  • 10-Year US Treasury Yield:
    • We enter the week slightly bearish with a potentially higher yield. That said, as the week progresses, French election poll guidance will weigh on this market
    • Presently not expected, but a convincing win by French Presidential candidate Marine Le Pen May 7, 2017 would likely take yields lower.
    • Emerging event risks over the next few months will likely take yields lower to 2 or below
  • US Dollar Index:
    • Sideways to Down and Spastic at times given current market participant expectation of a Macron French presidential election victory over Le Pen on Sunday May 7, 2017
    • If Le Pen wins the French presidential elections on May 7, 2017 then the dollar will likely have a bullish bias against the Euro
  • CRB Index:
    • A cautionary note – This index below 180 would be a dangerous near term negative and imply increasing domestic and global economic, social, and political uncertainties and DEFLATIONARY FORCES EMERGING IN THE COMMODITY SECTOR
    • With oil price correcting and geopolitical uncertainties consolidating for lack of a better descriptive phrase the CRB certainly appears close to breaking support and finding a lower low
  • $WTIC Light Crude Oil:
    • Fundamentals are finally weighing heavy on oil prices with a possible downside of 47 maybe lower
    • That said, remain focused on the bigger “Geopolitical Picture and Building Military Friction”
    • Sustained oil prices below $50 presents interesting macro challenges and implies greater global stability than actually exists
  • Soybeans:
    • Presently, global events appear to be near term supportive of the grain complex
    • Price floor likely in place, painful basing process underway
    • A Le Pen French presidential win on May 7 could cause soybeans to move another leg down
  • Corn:
    • Basing period underway with upward price momentum expected
    • Cautionary Note: A Le Pen French presidential win on May 7 would likely cause corn prices to move another leg down
  • Long Grain Rice:
    • Given rice fundamentals, price will move in sympathy with grain prices, global economic momentum, geopolitical uncertainties, and/or agronomic outlook
    • Rice producers’ overriding consideration for 2017 should be managing for a quality grain kernel
  • Cotton:
    • Geopolitical uncertainties remain high, so caution is advised
    • That said, complex price action underway with a bullish price objective into the 84-cent area still remains in play
  • Wheat:
    • Caution is advised for all markets due to geopolitical risk uncertainty
    • Bullish price potential to $4.71 remains a possibility
  • SPY SPDR S&P 500 ETF:
    • Likely bullish for a short period, then consolidate for a period
    • Allow price action to unfold
    • Trend remains up
  • QQQ NASDAQ Power Shares:
    • Remains bullish for a short period
    • Allow price action to unfold
    • Trend remains up
  • EFA iShares ETF - Global Equities Excluding U.S. and Canada:
    • Global events need to be digested
    • Entering a cautionary period
    • Trend remains up
  • EEM iShares ETF, Emerging Market Equities:
    • Global events need to be digested
    • Entering a cautionary period
    • Trend remains up
  1. Bobby Coats is a professor in the Department of Agricultural Economics and Agribusiness, Division of Agriculture, University of Arkansas System. E-mail: [email protected]



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