What's going on?

The market-friendly candidate, as expected, won the French presidential election on Sunday � but European markets did not jump higher on Monday as the good news was, apparently, already fully reflected in current prices. (tweet this)

What does this mean?

Two weeks ago, the first round of the French presidential election narrowed the field to �centrist� candidate Emmanuel Macron and the anti-establishment candidate Marine Le Pen (who, among other things, wanted France to stop using the euro). The euro and European stocks shot higher two weeks ago when the field was narrowed and polls showed Macron comfortably in the lead. When the widely expected news was confirmed on Sunday, there was, essentially, no more fuel to drive European investments higher.

Why should I care?

For markets: Things are coming together for investments in Europe right now.

Combined with the elimination of the French election as a perceived serious threat to markets, various factors are now supporting European investments. Europe�s improving economic growth has helped give investors confidence that companies operating in Europe will start making more money (since companies tend to do better as the economy grows faster). Also, the European Central Bank has kept interest rates at a historically low level, encouraging borrowing and, in turn, spending to continue. With European stocks already up a lot this year, the question for investors, as always, is how much of the news is already reflected in the current value of investments.


The bigger picture: Political risk in Europe hasn�t completely receded.

The rejection by the Dutch and, now, the French of anti-euro candidates have helped strengthen the stability of the euro as the risk that a major country would seek to pull out of the eurozone has fallen sharply. But that risk hasn�t entirely disappeared: an anti-establishment movement in Italy remains popular and seems likely to perform well in the next Italian election (expected later this year or early next year). Investors are unlikely to have heard the last of the political threats against the euro.