The holding in question is in currency manager Record (REC), whose price had surged 87 per cent in the six months to early April when it peaked at just over 47p. The trigger for Record to put in its best performance in the past five years was Donald Trump's election to the US presidency and accompanying fears of exaggerated exchange-rate volatility. The possible reason for the stock's slip - the price fell 14 per cent alone on the Friday before France's first round of polling - was the prospect of Emmanuel Macron being in the Elysée Palace by mid May.
True, last Friday Record also gave a fourth-quarter trading update, although that contained little new. Assets under management crept to record levels at the end of March, hitting £46.6bn; but that figure will be threatened by the imminent loss of a near-£1bn mandate. Meanwhile, as chief executive James Wood-Collins indicates, the global macroeconomic and political background continues to favour Record as companies and institutions remain anxious to insure their income and their obligations against erratic currency movements.
Those won't stop just because Mr Macron wins the French presidency. However, it must be encouraging if Europe's grouchiest leading nation - with, you might add, typical Gallic perversity - votes decisively for a candidate who favours change, inclusion, smaller government, free trade and even the European Union - all those things that disgruntled electors have been so resolutely rejecting. Granted, approval for Mr Macron does meet the now-familiar electoral imperative to bash entrenched elites. Yet there is no pretending that he's an archetypal populist; although, like those people of the people, Marine Le Pen and Donald Trump, he has quite a privileged background.
And it almost goes without saying that, if Mr Macron is poised to be in a position to breathe new life into France's sclerotic structure, is it time to dust off the investment case for French equities? Hence the table below.
Comme ci, comme ca
| France | Germany | UK | US | |||||
|---|---|---|---|---|---|---|---|---|
| % change on: | Stock mkt | Real output | Stock mkt | Real output | Stock mkt | Real output | Stock mkt | Real output |
| 1 year | 26 | 0.9 | 28 | 0.9 | 19 | 1.4 | 32 | 1.8 |
| 5 years | 56 | 2.4 | 58 | 8.3 | 25 | 6.4 | 114 | 6.7 |
| 10 years | 23 | 3.4 | 58 | 16.1 | 12 | 4.3 | 163 | 5.9 |
| 20 years | 156 | 22.1 | 164 | 30.1 | 65 | 34.6 | 310 | 33.5 |
| 40 years | 3,310 | - | 2,026 | - | 1,789 | - | 2,997 | - |
Note: Stock market returns based on MSCI country indices in translated into sterling; real output is per capita GDP at purchasing-power parity.
Sources: MSCI; World Bank
Actually, it's debatable that the case ever fully went away. It is well known that France boasts world-class companies - pharma giant Sanofi (Euro:SAN), cosmetics supplier L'Oréal (Euro:OR) and industrial gases specialist Air Liquide (Euro:AI) spring to mind. It's equally well known that its domestic economy is almost as much a burden as an asset - the French government hasn't balanced its budget since 1974; meanwhile, the state's grab of national output crept up to 57 per cent in 2015, the equal highest in the OECD group of 27 affluent nations. Whether that is a cause or an effect of France's chronically high unemployment might be debatable. What's not in doubt is that the jobless rate, at 10 per cent of the workforce, is more than twice the level of Germany, the UK or the US.
This contrast between corporate excellence and economic torpor is reflected in the contrasting data in the table. France's economic performance - distilled to the single measure of real growth in output - is by a margin the weakest of the four in the table; with, for example, less than half the level of growth recorded by each of the other three in the past five years.
But the country's stock market performance, as measured by the MSCI France index, pretty much keeps up with Germany's over the past 20 years (with a dip around the 10-year mark). True, it is way below that of the US, but so are Germany and the UK. And, over the course of an investment lifetime - 40 years - France's equity market turns out to be the best performer.
But the point to grasp - and which shapes an investment strategy - is that the table's stock market returns are all translated into sterling. If they were measured in their respective local currencies, then returns would have been much more equal.
Yet, in effect, we always invest in our local currency, the one we will eventually use to turn capital into spending power. In the past 40 years, sterling's spending power has weakened versus the world's other major currencies, meaning that it has been important for an investor to keep a decent chunk of assets in foreign currencies. Whether that will prove to be the case in the coming decades, who can say - especially as the perception of, say, a German investor would be quite different. But it will be sensible to have adequate currency diversification. In a roundabout way, that is really the investment lesson coming from France.
