Stock market indices: The harder the fall, the harder it will be

These stock indices allow investors to manage their stock portfolio. The two most well-known stock market indices in Paris are the CAC 40 and the SBF 120. The first is composed of 40 stocks that represent the largest French capitalizations. From the level of 2000 to 1^er In January he reached the 8000 point mark, a peak in his history! And according to market experts too “the trend remains favourable”.

The government, employers and experts call to “celebrate commendable performance” in these records, as in everyday business, with pride, loudness and without restraint (Les Ecos March 8, 2024). Above all, they pretend to consider that the financial health exhibited by this stock market index reflects the overall evolution of the French economy and finance. These records will reflect the return of competitiveness of the national production site, demonstrate the attractiveness of the region and express the resilience of our productive infrastructure.

Reverse the story for naive stock marketers

Except that the strategy of the “big French groups” contradicts this story for naive stock marketers. These large groups are growing internationally to the detriment of growth in France: 62% of their employees are in their subsidiaries abroad, compared to just 38% for the Germans – which we often cite as an example. These CAC giants conduct three-quarters of their activity overseas. By encouraging the development of low-cost manufacturing, migration and imports were encouraged.

The attractiveness, if any, can only be what shareholders appreciate, thanks to the generous dividend payout and share buyback policy. Major French conglomerates made a profit of 153.6 billion euros last year. Dividends, 67.8 billion euros, as well as share buybacks, 30.1 billion, reach unprecedented amounts.

For the most serious analysts, the company’s results do not justify the valuations the shares have reached. We will be in a configuration that is reminiscent of that prevalent in the early 2000s. A stock market record on Wall Street in 1999, driven by Internet stocks, would culminate in the March Crash a few months later. The 2000s caused the collapse of technology stocks.

An early stage of a financial crisis?

This is another pattern that led to liquidity outflows in 2008, and banks used this liquidity in the stock market to hurt employment. This led to monetary inflation with rising stock prices and sustained wage deflation. The return to reality was brutal. The exceptional profits expected by financiers were not forthcoming and the share price fell in early April.

With the current stock market record, are we not experiencing the early stages of a financial crisis, which is now rampant, but which promises to be more severe and more global than ever? The fall will be more difficult as the overhang in the stock market is significant.

The slowdown in French growth, the lack of investment, the first decline in employment and the external deficit in manufactured goods make sense in this context. France and Europe will escape only by asking the question of another use of money: less financing to keep the money burning, more financing for employment, education, health, cultural development and a real response to social needs is the new one. The vision will be promoted immediately.