Political instability in France may have limited effects on savings due to global financial integration, but important adjustments are necessary for 2025. With interest rates stabilizing, traditional high-yield savings options are diminishing, prompting a shift towards riskier investments. Diversification is essential, focusing on bond funds and mixed portfolios. Although the real estate market is sensitive to local politics, mortgage rates are falling. Additionally, while the stock market may be volatile, international markets are expected to perform well, particularly with undervalued European stocks and strong trends in gold and bitcoin.
The Impact of Political Instability on Your Savings
What can you expect for your savings amidst political instability in France? While the effects are likely to be minimal due to the globalized nature of financial markets, there are important considerations for 2025. Recent legislative measures aimed at extending the 2024 budget suggest that a budget deadlock is unlikely. However, savers should not become complacent. The upcoming year will demand a shift in investment strategies to maximize returns.
Adapting Your Investment Strategy for 2025
According to Maxime Dupuis, co-director of investments at Oddo BHF AM, the era of high returns on money market funds, CATs, and similar products is coming to an end. As key interest rates are expected to stabilize around 2% by June, the return on the Livret A will likely drop to 2.5% on February 1, while the LEP may see its yield halved to around 3%. Although these rates can help shield your savings from inflation—which is projected to stay below 2% in 2025—they won’t contribute significantly to your overall wealth. To enhance your savings, you’ll need to explore riskier investment avenues, as advised by Dupuis.
Diversification will be key. The guaranteed euro funds in life insurance and retirement savings plans might see a slight decrease in yield rates, averaging around 2.50% for 2024. However, top-performing contracts could still yield over 3%. By investing in these options, you can broaden your savings portfolio with bond funds that promise returns between 4% and 7%. Additionally, mixed or heritage funds that incorporate both bonds and stocks are poised for recovery, along with profile-managed financial services from insurers.
On the real estate front, the market exhibits a mixed response to political changes. While this sector is more localized and sensitive to political events in France, mortgage rates are trending downwards and are expected to average around 3% by the end of Q1 2025. SCPI investments have proven resilient, with some investors capitalizing on market downturns to acquire commercial properties at lower costs, which could yield returns of up to 7% in 2025.
Lastly, let’s not overlook the stock market, which can be a rollercoaster ride during politically turbulent times. The Paris stock exchange may experience fluctuations, but other international markets, like the U.S., are anticipated to perform robustly, especially with the potential re-election of Donald Trump and advancements in artificial intelligence. Europe might also present attractive opportunities, particularly with historically undervalued stocks in exporting companies. Moreover, after a remarkable performance in 2024, both gold and bitcoin are expected to maintain their upward trajectory.
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