Reaction to the elections in France

Though the election of a socialist as the French president may appear strange, or even alarming, from an American perspective, we feel Francois Hollande’s election must be viewed in the context of the French political milieu. France’s political elite draws heavily on a very formal, well-established educational tradition and Mr. Hollande is no exception to this pattern. His formal qualifications in terms of expertise in matters of policy and economics suggest his presidency may be more pragmatic than his campaign rhetoric might suggest. Anecdotally, the senior managements of French companies we have spoken with on this topic have confirmed this view.

In the context of policy direction within the euro zone, we believe President-elect Hollande’s influence will likely shift the balance more in favor of a pro-growth direction with some de-emphasis of fiscal austerity. Though the consequences of this policy shift are difficult to anticipate, they may somewhat ease the concerns of a severe recession, perhaps at the cost of extending the ultimate resolution of the euro crisis. Should this scenario come to pass, we believe that it may prove to be supportive to equity prices.

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The views expressed represent the Manager's assessment of the market environment as of May 2012, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Views are subject to change without notice and may not reflect the manager's current views.


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International investments entail risks not ordinarily associated with U.S. investments including fluctuation in currency values, differences in accounting principles, or economic or political instability in other nations. Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility and lower trading volume.

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