Goldman Sachs recommends a market bet as elections loom in France

France's presidential election is rapidly approaching, and Goldman Sachs is telling investors to stay cautious.

The investment banking giant recommended Monday that investors short French bond futures expiring in June ahead of the contest, amid the possibility that anti-establishment candidate Marine Le Pen or Jean-Luc Melenchon could stun pollsters with a win.

Political polling recently has been a terrible predictor of actual election results, internationally. Polls heading into last year's Brexit vote and the U.S. presidential election were mostly wrong, causing shockwaves across financial markets.

In France, investors predict that a Le Pen or Melenchon victory would likewise send markets into a frenzy.

"We would expect French bond spreads (and yields) to come under upward pressure if the first round of the Presidential election were to result in a strong showing of anti-establishment parties," Goldman said in a note to clients.

Le Pen has said repeatedly that France would leave the European Union under her leadership, while Melenchon has said he would pull the country out of NATO.

French bond yields rose Monday, creating a spread between themselves and more steady German bond yields that is at its highest point since late February. Yields move in the opposite direction of prices.

Most polls show Le Pen and Emmanuel Macron as the favorites to win the first round of the election on April 23, while Macron is expected to easily win in the May 7 runoff. France's presidential elections are held in two rounds.

But Communist-backed Melenchon's campaign has been gaining steam recently. A Friday poll conducted by French firm Ifop showed Melenchon polling 0.5 percentage points higher at 17 percent, while Le Pen and Macron's numbers have slipped slightly.

Le Pen drew widespread criticism Monday after she denied the French state's responsibility for a mass arrest of Jews in Paris during World War Two.

"I think France isn't responsible for the Vel d'Hiv," Le Pen said on Sunday, referring to the German-ordered roundup by French police of 13,000 Jews in July 1942.

—Reuters contributed to this report.