There will not be another Brexit.
There will not be another Trump.
The French will stop populism in its tracks.
This Sunday, France goes to the polls in the first of a two-round election. Much of the world worries that National Front firebrand, Marine Le Pen, will win. She's effectively Donald Trump, with better hair. She wants to drag France of the European Union and out of the euro. Japanese investors are so concerned they've been yanking record amounts of money out of France in recent months.
It is the wrong strategy.
For Le Pen will not win. And populism will die, at least in the context of significant Western economies.
But let me back up and provide some context...
3 For 3 So Far
Early last summer, just before the Brexit vote, I was in Britain gathering research. The U.S. and U.K. media insisted at the time that Brexit would not succeed. I disagreed - an unpopular position. I saw in London that the media were focused on issues that the big-money supporters in the "Remain" camp care about. The real fight was taking place at the lower end of the socioeconomic ladder - the people most-impacted by and who feel put upon by free-trade and open-border immigration.
In a fight between lots of dollars and lots of people, the people will win.
And they won.
A few months later, July 2016, I listened to Donald Trump's Republican nomination acceptance speech. I live in Trump Country - the Deep South - and I know from 17 years of writing for The Wall Street Journal that the national media has a coastal bias; that's just the residual impact of reporters and the crowd they hang with on and off duty. I know from my life in the South what people in the "fly-over" states think. And immediately after his speech I wrote: "In an odd way, [Trump's] speech was a contemporary version of [Reagan's] 'Morning in America.' In an odd way. [Trump] did present a vision of hope. You just have to see that vision and that hope through the eyes of those workaday Americans who feel hopeless and for whom Trump's words served as a manifesto for a brighter, better, wealthier, safer tomorrow … It's an odd perspective on hope that, I think, will propel Trump to the White House."
And he won.
European elections in key countries in 2017 were next on the populist docket. So, I went to Europe for my own research. I spent two weeks conducting "boots on the ground" interviews recently in Paris, Amsterdam, Milan and Brussels - cities in countries all sending voters to the polls this year, or, in the case of Brussels, the EU capitol that would feel the impacts of a populist shift. I walked away from those interviews and wrote: "My sincere belief at the end of this European tour is that key European nations will not follow the path of America and Britain. They realize, I believe, that they risk too much in doing so."
Going into the Netherlands vote last month, U.S. and U.K. media once again were hyperbolic in studiously warning of populism's imminent rise in Holland.
I knew from my time in a few Dutch cities and my interviews there that such an outcome would not happen. The Dutch political process of coalition building meant that no matter how well the populist agitator Geert Wilders fared in the election, he had zero chance of actually governing or taking the Netherlands out of the EU and the euro, as he had promised to do.
Which is exactly what happened.
Now we come to France...
Economy, Brexit and Trump Say Le Pin Fails
I will say it again: Le Pen will no win.
The ultimate winner will be Emmanuel Macron, as milquetoast as he might be. He and Le Pen will almost assuredly sit atop the polls when Sunday's vote is counted. Then, when they then face off in the second round on May 7, the French will have sent a message at which that the U.S. and U.K. failed: Populism isn't the answer and always does more harm than good.
Part of the reason is economic.
Populism thrives when the masses feel economically vulnerable. It fades when the masses begin to feel the economy is more vibrant. That happened in Spain, one of the countries the Europe's debt crisis slammed the hardest. The populist Podemos movement gained mass traction during the height of Spain's economic downturn. Today, however, Spain is an economic rock-star in Europe, with one of the Continent's strongest growth rates (despite persistently high unemployment), and Podemos is in retreat.
Holland saw something similar. Its economy is healthier than it has been in a while … and populism, for all its bluster and media coverage, failed there.
Simply put: People, once they begin to feel some level of prosperity again, won't risk throwing that away on brash politicians with destabilizing platforms.
I expect the same from France.
Though the media routinely label the French economy "the sick man of Europe," French GDP is picking up. The labor market is improving. And youth unemployment - a key factor in revolutionary elections - is trending down.
More importantly, though, is this: French voters have now seen that Brexit hasn't worked as well as envisioned by the Leave camp, and that Britain, in its upcoming exit negotiations with the EU, will face a very hard and painful reckoning. That could leave the British economy and the currency in a world of hurt.
Moreover, they see that Trump has been, to this point, largely a dud. He has been ineffective in bringing vision to his own campaign promises, and questionably competent as a steward of world stability. The last thing the French want is instability across France - and the success of Le Pen would assure that by destabilizing Europe and sending a chill through the Chinese and American economies.
So, Le Pen, while she might do well in the first round of voting on Sunday, will ultimately not sit as France's next president.
And populism's quest to take down Western democracy will have died.
In that is a trading opportunity...
The Profit Opportunity
Global Wall Street remains skittish because of the French elections. The U.S. and U.K. media - and their anti-EU, anti-euro bias - fuels that fear.
If Le Pen fares well in the first round - especially if she wins - breathless reporting of populism's success will see investors abandon the euro next week. That will be an opportunity to grab the pan-European currency on the cheap and play the rebound that will happen after she loses on May 7.
Do so by directly shorting the dollar against the euro, or by snapping up shares of a euro ETF such as the Guggenheim CurrencyShares Euro Trust (NYSEARCA:FXE).
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.