The iShares MSCI France ETF (NYSE:EWQ) fell 2.4% on December 4. The ETF is down 9.5% in 2018 so far. The election of Emmanuel Macron on May 7, 2017 was pleasing to France’s financial elite and was praised by much of the liberal world order who viewed the young politician as a rebuke to the populist politics that were rising across Europe.
Macron enjoyed positive approval ratings early in his rule, but his favourability among the French population has rapidly deteriorated in 2018. His now polls consistently below 30% and is facing a wave of protests that carry with them a revolutionary fervor. The so-called “yellow vest” demonstrations in France erupted in response to rising fuel prices, high cost of living, and tax reform pursued by Macron’s government.
The goals of the movement include the resignation of Macron, decrease of fuel and motor taxes, the end to austerity measures, and an improved social safety net. Macron’s government has attempted to defuse the demonstrations and pull itself out of a deep crisis.
The very reforms that were encouraging to French market bulls in 2017 have resulted in an explosion of class struggle.
Investors should expect more volatility from French equities in the near term. The iShares MSCI France ETF is worth monitoring during this crisis, but there is unlikely to be clarity on the political front until 2019.
