Investing.com -- The U.S. presidential election outcome may be too tight to call, but Charles Gave of Gavekal Research believes that if Republicans win big on Tuesday, then investors should sell the euro and the French bond market as quickly as possible as the single market's economic woes are certain to deepen.
"I have no idea whether Trump and the Republicans really will win," Gave said. "But I do know that if they do win, and win big, investors should sell the euro and the French bond market as quickly as they possibly can," he added.
The warning isn't without a merit. The eurozone is already battling an economic crisis, with France, which faces ever growing deficits and debt, at the sharp end of investor worries.
History also points to eerie parallels between the current situation and the 1980 U.S. election, Gave suggested, flagging Ronald Reagan's 1984 victory, which spurred significant changes in economic policy.
A similar shift could occur if Republicans gain control of Congress, and former President Donald Trump wins the election and follows through with his tax cuts and plans to shrink the Federal government, then the return on invested capital at U.S. companies would likely increase as would borrowing.
"Higher US long rates will also push up long rates in other big economies," Gave said.
This will be a major problem in France, Gave warms, amid expanding deficits and debt without the offsetting compensation of faster economic growth.
"Before long, France will be as bust as Latin America in 1982, Asia in 1997 or Greece in 2011," he added.