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The initial market reaction to the actual outcome of the very competitive first round should be positive for risk assets and the euro, though not necessarily ebullient. The extent of the rally depends on what the final numbers say about the strength of Le Pen’s showing, especially now that both Fillon and Benoit Hamon, the Socialist Party candidate who was badly defeated, have rushed to throw their support behind Macron for the May 7 runoff.

Looking ahead, and based on the widespread conventional view that a majority of the French electorate will again seek to vote for any alternative to the National Front, most market participants will likely assume that, when push comes to shove, Macron will be elected president — even though he lacks a political party and now faces the prospect of being pressed much harder on policy positions and past actions.

So Le Pen comes a close second and markets are writing her off? The extreme vote that Fillon and Hamon received will now likely go to Le Pen. That could be enough in a 2 horse race to see her over the line. Another terrorist attack……more votes her way. This thing is far from over and I would prepare for a Le Pen victory. Brexit and Trump could never happen……and yet, here we are.