After surprise populist electoral victories in the United Kingdom and the U.S. last year, the anti-euro, anti-immigrant National Front candidate Marine Le Pen, 48, could win the French presidency this spring, some investors fear. That prospect would depress a rallying French stock market and encourage capital flight.
 
With at least five major candidates, however, it’s likely that voters will give the nod to the center-right Republican candidate François Fillon, a 62-year-old former prime minister with pro-business bona fides, at least by French standards.
 
Fillon proposes, among other things, to cut civil-service jobs by about 10%, or 500,000, and make the highly regulated French workweek more flexible. He also wants to reduce taxes and government debt. His election would be positive for local stocks, at least at first.
 
From left: Marlene Awaad/Bloomberg (2), Simon Dawson/Bloomberg, Aurelien Morrisard/IP3/Getty Images
 
 
If, as is likely, no one wins an outright majority on April 23, the two with the most votes will vie in a second round on May 7. The leading candidates are Fillon, polling about 25% to 29% of the vote, and Le Pen, 23% to 25%. She has been softening her hard-right stance in an effort to pick up votes from the center right, but ultimately she wishes to remove France from the euro and sharply reduce its participation in the European Union.

Charles Lichfield, an analyst at political risk consultancy Eurasia Group, expects Fillon to win; he gives Le Pen a 30% shot at taking the presidency. She will probably make it to the second round, he says, but then lose. (Roundtable member Felix Zulauf has a different take on the election; see the cover story.)

British and U.S. polls got it notoriously wrong last year because a few percentage points made a difference, Lichfield says. In France, “you’d have to be 20 points off” for a Le Pen win, he adds.

In any runoff between the two, voters on the left will hold their noses and vote for the Republican, just as they did in 2002, notes Jean François Comte, co-president of Lutetia Capital, headquartered in Paris. “You still have 75% of the French people who find the far right unfit,” he says.

In 2002, Republican Jacques Chirac defeated Jean-Marie Le Pen, the National Front founder (and father of Marine Le Pen), who surprised everyone by making it to the second round. The Socialists then urged their voters to switch to Chirac, who won in the runoff.
 
 
Today, the French Socialists are again divided and weak. That’s partly why people fear Le Pen. The front-runner in that party is Manuel Valls, 54. He polls about 15% of the presidential vote and suffers from his connection as a former prime minister under current Socialist President François Holland, one of the most unpopular to hold that office. Hollande failed to reduce unemployment, now about 10%, and was unable to check terrorist attacks in the country.

Another important candidate for the French presidency is Emmanuel Macron, 39, a center-left independent from his own party, En Marche. This former economics minister and investment banker has gained popularity recently. He’s polling about 14% to 18%, and some believe that he could dislodge Le Pen and make it to the second round against Fillon. That would be a pro-market scenario, too. Others include radical-left independent candidate Jean-Luc Mélenchon, 65. Polls have given him a double-digit percentage portion of the vote.

THE FRENCH STOCK MARKET has rallied since the election of Donald J. Trump as U.S. president. Even so, the CAC 40, at 4922, is below recent highs, and remains substantially below its 2007 and 2000 highs, unlike the Standard & Poor’s 500 index.

A Fillon victory shouldn’t get investors overly excited. While he is the best candidate for France’s economy, Danny Van Quaethem, a Ghent, Belgium–based portfolio manager with Société Générale Private Banking, says the next French president will be constrained by a government budget deficit that is likely to be over 3% of gross domestic product and total government debt that is nearly 100% of GDP.

Jean-Charles Mériaux, chief investment officer of DNCA Finance, concurs. But even if the “French Thatcher,” as Fillon is dubbed, “realizes only 50%” of what he wants to do, it would be good for the economy and for stocks. “With Le Pen, capital will flow out of France. Fillon would bring back capital,” he says.
 
Mériaux says most French domestic stocks would benefit under Fillon. French consumer confidence is at a nine-year high, he points out. Auto industry stocks such as Renault (ticker: RNO.France) and Michelin (ML.France) could benefit, he says. So could energy giant Total (FP.France) and bank BNP Paribas  (BNP.France). Another way to play the French market is the iShares MSCI France exchange-traded fund (EWQ).

Audrey Kaplan, co-head of International equity at Federated Investors, says France looks more attractive than it did six months ago. Last June, just 25% of industry analysts were revising higher their 24 month forward-earnings forecasts for French stocks. Now, nearly 50% are.

A lower euro helps, but it also suggests that analysts are more confident of growth. Broad economic measures have improved in Europe in general, also. “The European recovery is genuine,” she says.

Predicting elections is a risky business, but the stars seem aligned for a Fillon victory—or at least a Le Pen loss.