To “Frexit” or not to “Frexit”?

That’s been one of the biggest concerns for investors in recent months. On Sunday, the question is will be put to rest when the French vote in the second and final round of the hotly contested presidential race.

Centrist Emmanuel Macron—an investor favorite for his pro-EU stance—will in Sunday’s runoff round battle against far-right, euroskeptic Marine Le Pen, whose promise to lead France out of the eurozone has earned her a reputation as an investors’ nightmare.

Read:Macron, Le Pen square off in debate ahead of Sunday’s French election

Also read:The lessons we must learn from Trump and Le Pen

And a lot of things are at stake, according to analysts.

“ ‘If Le Pen wins…it will be the start of the decomposition of all European institutions’ ” — Philippe Waechter, chief economist at Natixis Asset Management

“If Macron wins, we will go back to business as usual,” said Philippe Waechter, chief economist at Natixis Asset Management.

“If it is Le Pen, she will target a Frexit. She wants France to exit from all European institutions. The European institutions are based on the French-German couple and if Le Pen wins, it will be only Germany and probably it will be the start of the decomposition of all European institutions,” he added.

Despite that risk, financial markets are largely ignoring the election jitters and pricing a Macron win. The France-German bond spread—the extra yield investors demand to hold French government debt over German paper—is the narrowest it’s been since January and the euro EURUSD, -0.16% is trading close to a six-month high. France’s CAC 40 index PX1, -0.97% is up 5% over the past month, while Germany’s DAX 30 index DAX, -0.93% recently hit an all-time high.

Read:Emmanuel Macron: 5 things to know about the man poised to be France’s president

Read also:5 things you don’t know about Marine Le Pen—‘France’s Trump’

But before investors breathe a collective sigh of relief, there’s a few things they need to keep in mind.

Watch for the margin of victory

First of all, the margin of victory is something to be closely watched, Waechter explained. Macron is expected to win by 20 percentage points, according to the latest polls, which isn’t a convincing rejection of a populist, anti-EU candidate, according to Waechter.

“In 2002, when we had Jacques Chirac vs. Jean-Marie Le Pen, the father of Marine Le Pen, in the final round, the result was 80-20 in favor of Chirac. Now it could be 60-40 in favor of Macron. That means that clearly we have a divided French society and that’s something we have to pay attention to,” he said.

“A 55-45 margin would be very bad news for the next government,” he added.

Read:French election: When are the results on Sunday?

A slim win would probably make it harder for Macron to drum up enough public support to get a parliamentary majority in the general election for the National Assembly on June 11 and June 18. With no majority, he’d struggle to push through his reforms that are seen as necessary to break France’s weak economic growth trend, analysts said. Macron has vowed to reform the labor market and cut public spending.

Read:France’s GDP growth slows ahead of election

“As we have argued before, the French GDP growth rate used to be above Germany’s pre-2008, helped by more growth-friendly demographics. Structural reforms in the area of labor market flexibility and taxation could go some way to help lift French growth potential (again),” economists at UBS said in a note.

What if Le Pen wins?

Investor nerves were running high in the run-up to the first round of voting on April 23, when polls pointed to an extremely close race between four candidates: Le Pen, Macron, conservative François Fillon and far-left euroskeptic Jean-Luc Melenchon. Investors were particularly worried about a “disaster” scenario in which both anti-EU candidates—Le Pen and Melenchon—would qualify for the runoff vote, seen as leading France on the path to Frexit.

Even if that didn’t happen, French voters still rejected the mainstream politicians, casting aside parties that have dominated the Élysée Palace for decades. That signaled a “deep-rooted need for change” that the new president will have to address, according to Waechter.

Read:No matter which front-runner wins the French election, it’s a revolution

“ ‘The probability of that tail risk is nonzero and the potential consequences across assets too important to ignore’ ” — UBS strategists

That’s also why investors shouldn’t totally rule out a Le Pen victory on Sunday. U.K. betting site Betfair said on Tuesday that 70% of all bets placed over the past week had been for Le Pen, although 85% of all the money had been placed on Macron. Betfair gives Le Pen a 10% chance of winning on Sunday.

And if the populist candidate emerges as new French president, brace for some serious market mayhem.

Read:French election is your cue to hedge exposure to European stocks

Read:European equities a buy, but Trump policy inaction a risk: Eaton Vance

In a worst-case scenario, a Le Pen win could send the Eurostoxx 50 SX5E, -1.14% down 35%, yank 10-year U.S. Treasury yields TMUBMUSD10Y, 0.660% a full percentage point lower on haven-inspired buying, and weaken the euro EURUSD, -0.16% 10% on a trade-weighted basis, according to UBS strategists.

“The probability of that tail risk is nonzero and the potential consequences across assets too important to ignore,” they said in a note.