Raise cash levels or buy protection before French presidential vote as the call against a Marine Le Pen win is less clear-cut than the consensus believes, Bankhaus Lampe equity strategist Ralf Zimmermann recommends in note.
“Stock investors have little to gain and much to lose,” he writes. “Even if Le Pen does not win, uncertainty is probably going to rise by the time the election is held, which should also slowly crimp into stock prices.”
A Le Pen win can spur risk-off behavior in Europe that could send German bond yields to new lows, drag DAX lower by ~15% to 10,000, Euro Stoxx 50 by 20%
BNP and AXA would be hit hardest among stocks covered by Bankhaus Lampe if Le Pen wins
LEG Immobilien, Vonovia, Beiersdorf and Deutsche Telekom among those likely to outperform in a risk-off period
Stock markets have run ahead of fundamentals due to optimism about reflation; the potential upside has diminished as risks surrounding U.S. policy implementation and growth in China remain
Shift tactically from reflation trades (chemicals, materials, autos) to stable cash-flow (household goods, food, pharma, telecoms); latter should benefit from falling bund yields
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