The financial markets’ celebration of the French election results Monday, with further gains in Asian trading Tuesday, can only be described as a case of premature exultation. 

As expected, Emmanuel Macron edged out Marine Le Pen, and polls show he is now on his way to a thumping victory in the second round of voting next month. And then what? That’s the real question.

The answer isn’t so bullish, but it seems investors these days have developed an immunity to bearish news. Wall Street rallied after Trump’s election victory, as did Istanbul’s stock market when Recep Tayyip Erdogan won the referendum on revising Turkey’s constitution.

In the aftermath of the Brexit, Britain’s FTSE100 plunged, but it recovered quickly and is now 21% up on its pre-referendum level.

Maybe we should add to our financial lexicon the ostrich market – a bull market whose main feature isn’t charging forward, but keeping its head in the ground, hoping the dangers surrounding him will be solved by ignoring them.

The bullish case

The bullish case is that Macron will soon be president of France and he’s not at all a bad candidate. Macron is pro-EU, in favor of cutting France’s notorious red tape and profligate government spending, and making France more business friendly.

Despite Islamic State’s best efforts to influence the election with a well-timed terror attack, Le Pen wasn’t able to win the affections of much more than a fifth of French voters. 

After Geert Wilders came in a distant second in the Dutch vote last month, you might think that the populist wave in Europe, and its threat to the future of the EU and globalization, has crested.

However, that would be a complete misreading. Le Pen wasn’t the only anti-establishment candidate; on the far left, Jean-Luc Melenchon, was equally hostile to the EU and, although more open to immigration, was anti-business. Between them, they captured far more of the vote than France’s two establishment parties on the center-right and center-left. Maybe a majority if French voters aren’t angry populists, but a substantial minority is, and they can’t be ignored.

And then there is the problem of Macron himself. His policies place him firmly in the center, but in politics, good platforms and the best intentions aren’t enough. France’s political future will be determined not so much by the second round of presidential voting but by the parliamentary elections on June 11 and 18. Macron’s En Marche Party is just a year old, and barring a miracle, isn’t going to have a legislative majority.

Maybe center-right and left lawmakers will support his reforms, but that seems unlikely. Cohabitation, as the French call a government with a president from one party and a parliament and prime minster from another, has traditionally ended unhappily.

The bearish case

Then there is the state of Europe. Today’s ostrich markets laud the economic data that have been coming out of late. The Eurozone has enjoyed 14 straight quarters of growth, and even outpaced the U.S. last year. Unemployment is at an eight-year low and in the single digits. Polls show that sentiment is at its highest in six years. The tide of refugees that swamped Europe in 2015 and gave populists a big boost has been stemmed.

But Europe is hardly thriving, and having gotten through the worst of the crises of the last few years, the establishment in Brussels and in Europe’s national capitals doesn’t have any answers to them beyond holding back the populist tide.

Joblessness in Europe may be in the single digits, but just barely – it’s 9.5% right now, a much higher level than before the global financial crisis set in in 2008.

In France and many other countries the rate is higher still. Youth unemployment in the Eurozone is 19.4%, and much higher in France.

The International Monetary Fund sees continued modest economic growth this year for the Eurozone, or about 1.7% for the year and 1.6% in 2018. But bear in mind that not in recent years the IMF has more often than overestimated growth, and even it admits Europe faces significant challenges ahead with the Brexit negotiations, an aging workforce, lingering debt and weak productivity growth. Growth in Germany, the zone’s economic engine, is slowing.

In all events, the wave of populism isn’t just about economics. It springs from a deeper malaise over European and national identity in an era of open borders and global culture, as well as over growing social gaps that can’t be easily papered over the top line economic growth.

Macron’s economic policies may be sound, but they make him an outlier in France’s statist economy and the prospects of his implementing them are poor. And, as a man of the establishment  – a graduate of France’s elite colleges, a former investment bank and high official – he will be hard pressed to mimic Donald Trump’s appeal to the masses. Macron seems destined for mediocrity, and the markets, for a rude shock.