The CAC 40, France’s primary stock index, ended 2024 down 2.15%, lagging behind global markets due to political instability, including the dissolution of the National Assembly. While some French companies thrive internationally, the index struggled with sector-specific issues. Notably, the Dax and S&P 500 recorded significant gains. Concerns over potential U.S. tariffs under President Trump further complicate the outlook for the eurozone economy, although experts maintain that the CAC 40 is not facing imminent collapse.
Challenges Facing the CAC 40
Amidst a significant political upheaval in France, the CAC 40, the leading index of the Paris Stock Exchange, concluded the year with a slight downturn, trailing behind major global financial markets. By the end of its final session of 2024, the CAC 40 recorded a decline of 2.15% since the start of the year, a stark contrast to the impressive 16% rise observed in 2023.
According to Guillaume Laconi, European equities manager at Edmond de Rothschild AM, “This underperformance of the French market is unprecedented in the last 25 years when compared to other European markets and the United States.” In contrast, the Dax, the primary index for the Frankfurt Stock Exchange, finished 2024 with an impressive 18.85% gain, while the American S&P 500 index is anticipated to close the year with an increase exceeding 20%.
Andrea Tueni, head of market activities at Saxo Bank, points out that “the dissolution of the National Assembly has hindered any positive momentum” and increased “uncertainty for investors.” Prior to this political announcement on June 9, the CAC 40 had seen an increase of over 6% since the beginning of the year, only to lose all those gains and slip into negative territory in the following week.
Market Performance and Future Outlook
Despite its struggles, there is a silver lining for investors, as listed French companies derive 83% of their activities from international markets, according to Guillaume Laconi. The CAC 40 did set session records, peaking at 8,259.19 points on May 10 and closing at 8,239.99 points on May 15, but this was at a slower pace compared to its competitors.
Laconi elaborates that “the underperformance from January to June is largely attributable to specific factors affecting certain sectors and stocks.” For instance, while Danish pharmaceutical giant Novo Nordisk saw its value surge by over 40% during this period, French counterpart Sanofi experienced a slight decline. Similar trends were witnessed in the semiconductor sector, where ASML saw a 45% increase, whereas STMicroelectronics and Soitec faced substantial decreases.
The dissolution of the National Assembly coincided with a slowdown in the French market, with a significant portion of the CAC 40’s losses occurring prior to this political event. Adding to the concerns, the potential imposition of new American tariffs on European imports could further impede the already sluggish growth in the eurozone, as highlighted by Saxo Bank’s head.
With Donald Trump set to assume the presidency on January 20, he has already signaled intentions to impose tariffs ranging from 10% to 20% on European products, as part of his broader protectionist trade policy. His aggressive stance towards Canada, Mexico, and China raises additional concerns regarding international trade dynamics.
Alexandre Baradez, head of market analysis at IG France, observes that “2024 was unique with multiple themes impacting the market.” He concludes that while the CAC 40 has indeed faced challenges, it is not on the verge of collapse.