Emmanuel Macron will become the next French president. He will have unfettered power to relaunch the EU with Germany post their elections in September. The confirmation of Renzi as leader of the Democratic Party (PD) is another piece of this positive EU story. Macron should be able to work with the Assemblée to further economic reform in France too. This will not be a cohabitation of opposites, but an alliance of the willing. We remain long euro versus US dollar. We are long European equities (particularly Germany) and short Eurozone sovereign bonds.

Our positive view of the Eurozone is predicated upon the rejection of populism in pending EU elections. The political developments in Italy over the weekend reinforce this thesis. We remain long euro versus the US dollar, long Eurozone equities and short select EZ bond markets.

Trump’s new foreign policy marks a seismic shift. It returns the US to its role as global policeman backed by hard power. We do not think this is a temporary change as it is a policy crafted by senior players with a firm grip on reality and professional competence. Nor is it a return to foreign policy orthodoxy. It is backed by hard power and is likely to reverse the progressive loss of US influence in Asia and the Middle East. In the long-term it is likely to make the world a safer place. In the short-term geopolitics will be volatile and will matter for markets.