Source: CNBC

“A week is a long time in politics”

Former British Prime Minister Harold Wilson

It’s less then two weeks before the presidential election and the polls show that the centrist candidate has a commanding lead over the populist challenger. The consensus of the political experts is overwhelming. The race is over.

No, I am not referring to the current French presidential elections but the US presidential elections held last year. As an example, this Telegraph article dated 27 October, headlined with the Democratic candidate Hilary Clinton enjoying a massive 14 point lead and went on to describe the virtually inevitable political fallout of her victory on Election Day.

Of course, just because the experts have been wrong before doesn’t mean they are wrong this time.

Indeed, the 1^st round of the French elections was striking for the lack of surprises. No hidden Marine Le Pen (“Le Pen“) vote. No unexpected surge of support for the conservative Francois Fillon (“Fillon“). The Emmanuel Macron (“Macron“) vote remained firm despite the risk of undecided voters floating away to other candidates.

Le Pen has had a lacklustre campaign and her polling has dropped from a peak of 27% to 22% in the final count as voters moved away to the hard left Eurosceptic challenger Melenchon. Yet, the relatively poor performance of the populist hard right is in no way indicative of a broader rejection of anti-establishment populism by the French electorate.

As Ambrose Evans Pritchard notes in the Telegraph, 48pc of the French population “…voted for movements – from the hard-Left to the hard-Right – that fundamentally reject the EU as currently structured, with the sovereignty candidate Nicolas Dupont-Aignan winning 1.7m votes on a pure anti-EU ticket”. In other words, approximately half the French population rejected the pro-European establishment personified by the politics of Macron.

Source: Telegraph

From a historical perspective, Le Pen performed very well, and her entry into the second round is an historical success for the nationalist hard right. As the above map shows, Le Pen came first across broad swathes of France, with certain regions of the north-eastern Rust Belt polling above 30%. This is a massive step forward from the elections held in 2012, let alone the electoral drubbing her father received in 2002.

Taking this into consideration the fact remains that the overwhelming consensus is that Macron will comfortably defeat Le Pen on 7 May 2017.  This is backed up by the polling evidence which suggests that Le Pen will struggle to get more then 40% of the vote.

It is interesting to note that according to Opinionway, the issue of security and terrorism is a top priority for approximately 40% of the electorate. The same proportion of the electorate plan to vote for the National Front in the second round. The bad news for Le Pen is that whilst there is likely to be a correlation between the issue of security and voting support for the populist hard right, the issue of terrorism is not the top concern for the majority of the French electorate.

As noted in a previous post, the over 65 voters who preferred the Republican candidate Fillon will be the main kingmakers in this election. These “silver voters” are socially conservative, support membership of the Euro and the European Union and wish to see a muscular approach to the threat posed by jihadi terrorism and the rising tide of Islamic fundamentalism. The silver vote remained loyal to Fillon despite the corruption scandals and are now potentially in play for both candidates.

Le Pen and her inner circle have clearly been making steps to address the two biggest challenges to converting these voters, the first being the lingering toxicity of the National Front brand and the second the fear provoked by her economic plans to leave the eurozone. For pensioners relying on their savings, exiting the euro would likely lead to a significant depreciation of the value of their assets, potentially crippling the finances of a retired voter.

The decision to temporarily step down as leader of the National Front and to appoint the mainstream conservative Nicolas Dupont-Aignan as her proposed Prime Minister are further steps in distancing herself from the National Front. They are principally designed to reassure conservative voters who are open to voting for Le Pen in the second round.

It is potentially more significant that media reports are suggesting that a potential Le Pen/Dupont-Aignan government would not proceed with plans to call a referendum on leaving the Euro and the European Union. If true the main obstacle for the Catholic Right electoral block to switch to Le Pen has been removed. It has been calculated that Le Pen lost 4% of the electorate in the 2012 presidential elections due to its anti-euro stance.

The presidential debate due on 3^rd May will be critical to Le Pen’s chances. If she performs well, reassures conservative voters fearful of her economic agenda and provokes Macron into a series of blunders, you may see a surge of support for the hard right candidate in the polls.

Many voters complain that they don’t know what Macron stands for and if, under pressure, he comes out with statements that shock both the Left and Right, it will drive further voters to either abstain or turn to Le Pen. Macron has stated publicly his support for Angela Merkel’s controversial decision to open the borders to over a million Muslim migrants in 2015. The centrist candidate has also argued that France will be unable to stop the further mass migration of refugees into Europe. A population where a majority (60%) would back a total ban on migration from majority Muslim countries would likely be appalled by such comments in a nationally televised debate.

The Republican Front is fracturing, with the hard left populist Melenchon refusing to endorse Macron and the conservative politician Nicolas Dupont-Aignan joining forces with Le Pen. It is true that the established parties have endorsed Macron but it remains an open question whether the Left will come out in force for an ex-Rothschild banker and supporter of globalisation.

There is a narrow path to victory for Le Pen which will rely on mass abstention from the Left, the conversion of the Catholic Right and a strong turnout by her core blue-collar vote on 7 May. A prerequisite of such a scenario will be a breakthrough in the 40% polling ceiling in the coming week. Without that surge in support, as the successful forecaster Nadeem Walayat notes, it is highly unlikely that Le Pen can win the election.

Should Le Pen see a surge in support in the coming week and hit the mid-40’s, the hard right leader will be within the margin of error of victory, as noted by the French political scientist Serge Galam.

Galam has argued in a mathematical paper that should Le Pen voters turn out in greater numbers then the Macron vote, Le Pen can win even though she trails in the opinion polls. As an example, “if Le Pen is projected to lose by 45 to 55 percent in the runoff, she could win if turnout for her is 85 percent versus 70 percent for her rival, for an overall turnout of 77 percent.”

Overall, my current forecast, as at the current state of play, is that Macron will defeat Le Pen in the second round of the French presidential election.

I will be providing a final forecasting update on the likely winner of the presidential election in a week’s time.

British general election – probabilistic forecast update

I recently reviewed the British general election which you can read here.

My probabilistic forecast is that the Conservative Party has an 85% chance of winning with an enlarged majority in the House of Commons.

 

Last year I warned of the possibility that Prime Minister Theresa May would go for a snap general election in either the spring or autumn of 2017 prior to the beginning of the serious Brexit negotiations. As it happens, the logic of calling an early general election has clearly become overwhelming for the Conservative leader, with the general election to be held on Thursday 8 June.

On the face of it, the outcome appears to be a forgone conclusion. The opinion polls all show that the Conservative Party has a strong and consistent lead over the Labour Party, with a Yougov poll showing the Tories with a massive lead of 48%, versus a second place Labour party, at 24%. As long standing readers of this blog know, surface polling should be read in conjunction with deeper underlying polling of the electorate to get an accurate sense of the public mood. What does the underlying polling data tell us?

According to the Yougov polling data, the Tories have a commanding lead on the critical issue of economic competence, with a 24% lead on this issue. When it comes to leadership, 54% of the electorate think that Theresa May makes the best Prime Minister compared to only 15% for Jeremy Corbyn, the leader of the Labour party. On the two most critical issues for the average voter, perceptions of economic competence and leadership calibre, the Conservatives are massively ahead in the polls.

The underlying polling data provides little to no comfort to supporters of Jeremy Corbyn and would indicate that the Conservative lead in the polls is durable and not a mirage. However, there are a number of factors that could contain any potentially huge increase in the Conservative majority. The first is low turnout by soft Tory voters who may feel that there is little point of turning up at the ballot box since Labour has no realistic chance of winning the election. This would be amplified if they voted Remain during the Brexit referendum as Theresa May has embraced the Brexit cause since coming to power.

The Liberal Democrats are likely to see a revival in their fortunes since their electoral drubbing in the 2015 general election. The Liberals have become the go to option for those voters angry about the Brexit result and who wish to attempt to reverse the decision to exit the European Union. The Liberals are likely to regain seats from the Tories in London as well as the south-west. Tactical voting by Remain voters, some of them soft Tory’s, could impact seats in the affluent south of the country.

The Conservatives hope to gain dozens of Labour marginal seats where majorities voted to leave the European Union. Considering the dire state of the Labour party this is likely and will compensate for the potential loss of seats to the pro-European Liberals. The anti-EU UKIP party is crumbling in the polls as its supporters defect to the pro-Brexit Tories. The combination of the return of UKIP voters and Leave voting soft Labour voters should be sufficient to turn a considerable number of Labour seats blue on 8 June.

Whilst the possibility of a Labour government is not impossible, it seems highly unlikely as a political outcome, taken the above factors into consideration. My forecast is a Conservative victory with an enlarged majority but it is too early to predict how big the majority may be.

Should Jeremy Corbyn perform better then expected during the campaign, the current talk of a landslide victory of over a 100 seats will look increasingly out of touch should the polls start to narrow. A major gaffe by the Labour leader could lead to a further collapse in Labour support (down to 20%) and push the Tories close to or above 50%, leading to the possibility of a 1997 style defenestration of the Labour party.

I will provide an updated forecast of the British general election result as the campaign develops.

1^st round French presidential election forecast

The 1^st round of the French presidential election race is nearing this Sunday 23^rd April and the polls indicate that all four main candidates have a reasonable chance of getting into the second round.

I recently wrote that the reader should prepare for the unexpected and I consider this still to be the case. At the beginning of the year I warned that there was a possibility that Marine Le Pen (“Le Pen”) may not get to the second round, which was one of the reasons why I only gave a 60% probability chance of Le Pen winning the French presidency.  This is one of a number of possible scenarios, including Melenchon getting into the final two or Fillon performing better then expected which could happen this weekend.

I wasn’t planning to forecast the likely winners of the 1^st round due to the extraordinary volatility of the French electorate and the difficulty of picking out the winners of a crowded four horse race. This remains the case.

However, my reading of the French electorate does indicate to me that on a balance of probabilities the most likely outcome of the 1^st round will be Le Pen winning with Fillon coming second. Please note that this is a very tentative forecasting prediction and all four main candidates, Le Pen, Fillon, Macron and Melenchon have a plausible chance of getting into the second round.

The reason why I think that Le Pen and Fillon may have the edge is that France profonde, conservative, patriotic and the backbone of French society, will turn out in force for both Le Pen and Fillon. Both candidates have committed supporters and for different reasons feel deeply alienated and angry about the direction the country is going.

The Bloomberg article on the provincial town of Donzy may prove to be a canary in a coal mine.

Of course, I may be wrong and if I am honest, this has been the toughest forecast to make to date since launching the FI blog. We will find out on Sunday if my forecast turns out to be correct.

Whatever happens, I recommend preparing for the unexpected.

The truth is that nobody knows what the results will be in the 1^st round of the French presidential elections due next Sunday 23^rd April 2017. The single most salient fact in this extraordinarily volatile election is that approximately 40% of the French electorate are undecided. Significant swings could happen on the day of the election which should be taken into consideration when reviewing the polling data.

I would therefore recommend that readers should treat with skepticism the predictions of anybody, including myself, on what the outcome will be.

Given the huge numbers of undecided voters and the political upheavals within the Republican and Socialist party primaries, I would not be surprised if further unexpected electoral shocks will be dealt by an angry and anti-establishment minded French electorate.

I will therefore outline a number of potential electoral shock scenarios which could happen in the 1^st round, based on my reading of the presidential race to date.

Francois Fillon (“Fillon”)

The French conservative candidate has survived a series of bruising corruption scandals and is currently around 18% in the polls, behind both Macron and Le Pen. As Ambrose Evans Pritchard argues in the Telegraph, Fillon is an experienced, solid and presidential candidate who may yet see a revival of his political fortunes as the French public turn to a safe pair of hands. Fillon is from the political mainstream, is tough on security and is clearly the most statesmen-like of the candidates in the contest.

It is plausible that centre-right voters who are flirting with voting for Macron will return to the Republican fold, ensuring that Fillon does better then expected on election night.

Marine Le Pen (“Le Pen”)

Le Pen has consistently polled around 25% of the vote and has the most committed support base of all the candidates. Most pundits, including myself, consider it likely that she will end up going into the second round.

One possibility is that Le Pen will under perform on the night as traditional National Front voters, who dislike her anti-Euro/EU views, defect to Fillon. Fillon’s pro-business, socially conservative and pro-Euro stances could resonate with elements of the National Front electoral base. The Dutch populist politician Gert Wilders found that the centre-right Mark Rutte’s hard-line policies on security leached voters away from his own party. Fillon’s own strong positioning on the rising threat posed by Islamic fundamentalism could have a similar role in the French elections.

The other shock scenario is that Le Pen will out-perform expectations, hitting close to or above 30% in the 1^st round. The bellwether town of Donzy in Burgundy has a record of accurately reflecting the national vote and informal polling suggests that Le Pen will do considerably better then the national polling suggests in the 1^st round.  It is clear in the Bloomberg article that not everybody is comfortable with admitting that they plan to vote for Le Pen, which suggests a potential shy Le Pen vote, in force. One has to wonder if some of the “undecided” voters don’t want to admit to a pollster that they plan to vote for the National Front.

There is some evidence to suggest that this is a real trend. Polling during the US elections which asked voters who they thought their neighbours and friends would vote for was more accurate then the official polling data, suggesting that there was a “shy Trump” force at work which manifested itself on election night, as I predicted before the election. A similar poll recently conducted in France “…asked voters who they believed their friends and neighbours are supporting, and voters revealed Le Pen was their choice.”

A strong performance by Le Pen does not mean she will necessarily win in the sound round. Indeed, the article on Donzy suggests that a Le Pen versus Fillon contest will lead to a narrow Fillon victory. However, a strong performance by Le Pen would electrify the country, the financial markets and provide the National Front with massive momentum going into the second round.

Emmanuel Macron (“Macron”)

The independent centrist Macron is the golden boy of the Parisian elite, the media and the financial markets. It is clear who the bulk of the French establishment would like to see winning on 7^th May. However, the French are in a rebellious mood and are deeply unhappy about the economy, security and the state of the country. It is questionable whether Macron, an inexperienced politician, can persuade the French population that he is ready to be head of state.

Polling suggests that around 40% of the Macron vote is undecided whether to vote for him, by the far the softest support of all the leading candidates. There is a real risk that Macron has peaked too soon and will see a fall in his numbers on election night to around 18%, knocking him out of the race.

The alternative is that Macron will do better then expected, with voters signalling a readiness to rally around a centrist, pro-European and reformist candidate after flirting with the radical fringes on the Left and Right.

Jean-Luc Melenchon (“Melenchon”)

The hard-left Melenchon has been a surprise hit during the two presidential debates held and has seen his poll ratings jump to around 18%, just ahead of Fillon. It is clear that the hard-line socialist has the momentum going into the 1^st round.

Melenchon is a Euro-sceptic, hostile to globalisation and a “soak the rich” candidate of the Left. The mere possibility that he could get into the second round is causing alarm bells to ring in trading rooms and boardrooms in Paris, London and New York.

I consider the possibility that Melenchon could get into the final two a real possibility assuming he is able to further consolidate the Left vote. The Socialist candidate Benoit Hamon is seeing his poll rating slump as socialist voters get on-board the Melenchon train. The truth is that voting for Hamon is a wasted vote, if you are a socialist, whilst Melenchon now has a realistic chance of getting into the second round.

Should Macron and Fillon both get approximately 20% of the vote, Melenchon could sneak into second place assuming he can get a further fraction of the Socialist party vote in the coming 10 days. A Le Pen versus Melenchon contest would be the ultimate nightmare for the French and European political establishments and would trigger violent upheavals in the financial markets. Whilst I do not consider it likely, it is not improbable, taking into consideration the trends within the polling data.

Conclusion:

We will soon find out who will be the winners of the 1^st round and I will publish a Forecasting Intelligence (FI) blog post on the outcome, the implications and whom I think is most likely to win the second round.