Barty argued in The Trump Inflection, Le Pen’s victory has the potential to be even more of an earthquake for the world’s financial markets. Indeed, we have already seen a 1vol move in April 2017 V2X futures since last month. So our central case is French political risk caps markets to the upside for Q1 and most of Q2 but that the centre right candidate Fillon is elected President. As Gilles Moec argues, his pro-market reformist agenda could unlock French growth and we think it could prove a significant positive catalyst for European equities more broadly if the political risk premium is priced out against a solid European and global growth backdrop. More of the same expected in Germany We think Germany carries less political risk than the French election now that Merkel has formally announced she will run again to be Chancellor. As a result, our central case is that Merkel will continue to head a coalition government. We could see the populist AfD win more votes than in 2012, but polls show a clear and decisive margin in favour of the CDU and the existing coalition with the SDP suggests that an extension of their partnership is the most likely eventuality. Chart 39: German polls show a consistent lead for Merkel’s CDU party 40 39 1g on AeA 9nte go gbea 8,048 wa* Babag 24 28 a, 30 7-4 & 4 a4 a a 4 a. &@ 4 295 1 90 PU YOY arr Vii aviation Ti ty Gy Gt s a ry 10 0940000000048 220044 nnnnsassasasabasaasannaa a*a 5 0 acCDU a@SPD_ aAfD Source: Allensbach (15-Sept, 13-Oct), Emnid (7-Sept, 14-Sept, 21-Sept, 28-Sept, 5-Oct, 12-Oct, 19-Oct, 26-Oct, 2-Nov, 9-Nov, 19-Nov), Forsa (2-Sept, 9-Sept, 16-Sept, 23-Sept, 30-Sept, 7-Oct, 14-Oct, 21-Oct, 28-Oct, 4-Nov), Forschungsgruppe Wahlen (22-Sept, 13-Oct, 27-Oct, 10- Nov), GMS (14-Sept, 12-Oct, 12-Nov}, Infratest dimap (21-Sept, 5-Oct, 19-Oct, 2-Nov), INSA (5-Sept, 12-Sept, 19-Sept, 26-Sept, 3-Oct, 10- Oct, 17-Oct, 24-Oct, 2-Nov, 7-Nov, 14-Nov, 22-Nov), Ipsos (10-Oct) Brexit was the big political topic for Europe going into 2016.