French vote bodes well for stocks

U.S. rides global surge after signs point to European Union holding together

new york» Vive le rally. U.S. stocks joined a worldwide surge higher Monday after the first round of France’s presidential election raised expectations that the European Union will hold together. A candidate seen as pro-business won the most votes Sunday, and many investors expect him to win a runoff against the remaining anti-EU candidate, which is set for May 7.

Prices for gold, Treasurys and other investments that signal fear in the market all sank, while a popular gauge for measuring investor fear eased by the biggest margin since the summer of 2011.

“It’s good news, and now investors have a reason to focus on the fundamentals in Europe, which are strong,” said Luca Paolini, chief strategist at Pictet Asset Management, a U.K.-based firm that manages $165 billion in client assets.

The Standard & Poor’s 500 index jumped 25.46 points, or 1.1 percent, to 2,374.15. The Dow Jones industrial average rose 216.13, or 1.1 percent, to 20,763.89, and the Nasdaq composite gained 73.30, or 1.2 percent, to 5,983.82.

Coming into Sunday’s election in France, several candidates railed against the European Union, one of the world’s dominant trading partners. A victory for one of those candidates would have followed the path set by last year’s “Brexit” vote by Britain to exit the European Union and the U.S. election of President Donald Trump as a kick in the face to the globalist, free-trade worldview.

Emmanuel Macron, a candidate investors see as pro-business, ended up winning the most votes. He will face Marine Le Pen in a runoff election in two weeks. Le Pen is one of the candidates who campaigned against the European Union, but many investors expect Macron ultimately to be victorious.

“It’s not only France” where the forces of populism seem to be waning, said Paolini. He pointed to the Dutch elections last month, where a candidate who ran on the pledge to pull the Netherlands from the European Union, lost.

“This surge is fading,” Paolini said. “Maybe it’s too early to celebrate, but that’s what the market is pricing in.”

Risks remain: Not only is there the runoff election for France in two weeks, but there is also a parliamentary election in June. And other elections may loom even larger for the future of the European Union, such as next year’s Italian vote, Paolini said.