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The Yellow Vests Movement

Sigma Investment Counselors

May 31, 2019

According to Wikipedia, the yellow vest movement is a populist, grassroots, political, revolutionary, (take your pick) movement that began in France in October 2018.  The movement is motivated by rising fuel prices, a high cost of living and the belief that a disproportionate burden of the government’s tax reforms are falling on the working and middle classes, especially in rural and peri-urban areas.

While the movement has evolved over the last several months, it appears likely that the origins of the protests relate to the issue of diesel cars in France.  By 2015, following a number of government incentives favoring diesel cars, and lower taxes on diesel motor fuel, two out of every three cars purchased in France consumed diesel fuel.  In a complete reversal, new government policies have been introduced that effectively penalize diesel use, in part relating to climate issues and the recognition that diesel fuel is part of the problem, not part of the solution, as previously thought.

This is particularly burdensome to lower income, rural Frenchmen, who need to drive longer distances, require diesel for farm equipment and spend a disproportionate percentage of their income on motor fuels.

Investors should consider the implications of government efforts to respond to climate issues and recognize the risks associated with policies that may turn out to be regressive.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA

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