This coming Sunday there will be an election for President of France that will have wide repercussions for American investors. As of this writing it appears that the current President Nicolas Sarkozy will lose to socialist candidate Francois Hollande. Mr. Hollande is a hopelessly leftist candidate pledging to hire more teachers and spend money in other social service areas, while raising the marginal tax rate in France to 75%. He has threatened to renegotiate the recent European bail out of Greece and is not expected to be a strong supporter of Euro Zone austerity measures, particularly the type espoused by Germany.
Accordingly, I am very concerned that France will become the next European basket case as the country's debt will soar even more out of control and their debt will turn into garbage. This means real trouble for the world's economy since France is a major player unlike Greece or Spain. I'm concerned that the fallout from the French election will cause a severe market drop next Monday as investors start to recognize the import of the socialist victory. Indeed, next week the market will be experiencing the French Connection and how long it will last is anyone's guess.