European Elections Impact on Stock Markets

The upcoming European Parliament elections are expected to have a limited impact on the political landscape, but for investors, certain sectors could benefit from the outcome. The uncertainty surrounding the stock market reaction to an election is always a challenge to predict, especially in the current economic environment where Europe has experienced a slowdown and rising inflation since the last elections in 2019.

According to recent surveys, while only 34% of French citizens express trust in the European Union, 49% of Europeans overall support the common currency. This shift in sentiment towards the euro indicates a different kind of Euroscepticism in 2024 compared to previous years. The dominant conservative European People’s Party is likely to maintain its position in the European Parliament, potentially encouraging positive market reactions.

Despite historically minimal market impact from European elections, recent trends show increasing investment flows towards European stocks. With Europe’s economy showing signs of resurgence while the US economy slows down, there is a possibility of narrowing the valuation discount of European stocks compared to American stocks.

The environmental and energy sectors are expected to undergo changes post-election, with potential implications for policies related to renewable energy sources and sustainability. While some sectors like the automotive industry may benefit from delays in transitioning away from traditional fuel sources, challenges remain due to global market dynamics and competition from other regions.

In the context of increasing focus on sovereignty, sectors like semiconductor manufacturing, defense, and software services are likely to see growth opportunities. Initiatives like the European Chips Act and rising defense budgets across EU countries indicate a shift towards self-reliance and support for local industries.

Overall, the outcome of the European elections may not drastically alter the political landscape, but it presents opportunities for investors to navigate changing market dynamics and sector-specific trends. As the results unfold, the stock market reactions will be closely watched for signals of future economic developments.