France is sinking, the CAC is soaring. What does this mean?

Impact of the French political crisis on the stock market 🇫🇷 The recent political dissolution in France has sent shockwaves through the markets. The CAC 40 has fallen by nearly 10%

Impact of the French political crisis on the stock market 🇫🇷

The recent political dissolution in France sent shockwaves through the markets. The CAC 40 fell by nearly 10% , marking a period of heightened volatility and uncertainty .

Investors have factored this political risk into valuations. As a result, a significant discount has settled on the French index, which is now valued considerably less than its counterparts.

• 13.71 times earnings for the CAC 40

• 15 times for the German DAX

• 25 times for the American S&P 500

However, this relative undervaluation could represent an entry opportunity for some investors.

Luxury goods save the index thanks to China 👜

Another factor tempered the decline: the announcement of new stimulus measures in China . This renewed dynamism in the world's second-largest economy provided a welcome boost to the luxury sector , which has a significant weighting in the CAC 40.

The big names in luxury, which have been hit hard by the Chinese slowdown for the past 18 months, are now benefiting from a rebound in demand , which has allowed the CAC 40 to partially resume its upward trend.

The CAC 40: an index disconnected from the French economy 🧾

It is important to remember that the CAC 40 is not representative of the domestic economy . The companies that make it up generate the majority of their revenue internationally .

The domestic situation in France , marked by a tense socio-economic climate and sluggish domestic consumption, is therefore only slightly reflected in the performance of the CAC 40.

External support despite local tensions 🌐

The good health of global markets and the general appetite for risk helped to support the Paris stock exchange , despite internal turbulence.

The overall environment, combined with the resilience of the luxury sector, allows the French index to partially mask the structural weaknesses of the national economy.

And what does that mean to me? 🤔

No apocalypse in sight 💡

Contrary to alarmist predictions, the political crisis has not led to a financial collapse . This is a positive sign. However, we remain vigilant in the face of a possible worsening of the economic and political situation , particularly for small and medium-sized enterprises , which are more vulnerable to local disruptions.

The Evvest strategy 🧭

• Maintaining diversified and highly international portfolios

• Monitoring the evolution of the 2024-2025 budget: tax breaks are still in effect for the coming year

We therefore advise taking advantage of these benefits while they still exist , while maintaining a pragmatic approach tailored to your investor profile .

Conclusion: vigilance and discernment 📊

The CAC 40 has rebounded thanks to the international context and the luxury sector, but this should not make us forget the fragilities of the French economy.

At Evvest , we remain confident but cautious, favoring global exposure to cushion local shocks and capture global opportunities.

Enjoy it!