The Paris stock exchange’s flagship index has been buoyed by strong results from French companies, enthusiasm for artificial intelligence and hopes of a rate cut.
This is a historic day for the Paris Stock Exchange. The CAC 40 crossed the symbolic threshold of 8,000 points in the session this Thursday, March 7 at 2:30 PM, an unprecedented level. In recent weeks, the flagship index of the Parisian market has been buoyed by excellent results announced by the champions of the CAC 40. While they collectively increased their profits in 2022, with a cumulative net result of 144 billion euros, this indicator further advanced last year to 147 billion euros for the 38 groups in this flagship index. Investors’ upbeat mood is also fueled by promises of artificial intelligence and the prospect of key rate cuts from major central banks by the end of the year. “ This is great news for equity markets, it lowers the cost of debt for companies. It also tends to shift the amount invested in bonds to stocks that become more attractive. “, The analyst explains.
Buoyed by these green lights, the CAC 40 thus broke the 8,000-point ceiling it had been stumbling on for days. After rising 16.5% in 2023, it now represents a 5.5% year-to-date increase. On Friday February 23, the CAC 40 reached 7,966 points for the first time in its history. Since then, it hovers around this level.
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Profits are increasing
Barring a few exceptions such as ArcelorMittal whose results were hampered by lower raw material prices, most CAC 40 companies posted gains last year. On January 25, after the publication of its 2023 accounts, LVMH’s shares rose 12.8% and its capitalization jumped by 40 billion euros in a single session, which is unprecedented. If luxury remains the main driver of the CAC 40, many industrial companies are also in bright form. Thus, when Air Liquide announced its results on February 20, it rose 8%. An increase for which this portfolio value is unusual. The market was dazzled by the results and prospects announced by the industrial and medical gas giant. This week, this favorite of individual shareholders became the eighth company in the CAC 40 with a market capitalization of more than 100 billion euros.
Markets have always been fond of good stories and, over the past year, they have also been served by the promise of artificial intelligence (AI). The CAC 40 champions are also benefiting from the rally, which has boosted all major stock markets. Almost every sector of the economy is affected, from commerce to finance, medicine and most industries. Financials, such as BNP Paribas, Société Générale and insurer Axa, telecom operators such as Orange, which have mountains of data, are of great interest to specialist managers. Air Liquide, again, is a leader in the supply of pure gases used to manufacture chips.
Another powerful driver: shareholder compensation policies. In 2023, the CAC 40 companies paid 97 billion euros to their shareholders in the form of dividends (67 billion) and share buybacks (30 billion). They should be more generous in 2024. Among the big names in the CAC 40, LVMH, BNP Paribas, Sanofi and Air Liquide have all announced significantly increased dividends. Share buyback programs are also on the rise. On the occasion of its results, Axa unveiled a new plan of 1.6 billion euros, Michelin promised 1 billion, Carrefour 700 million and Stellantis, whose profit never surprises, 3 billion.
The stock market may fluctuate with good and bad news, but paying regular coupons adds significantly to the portfolio’s value over the years. The CAC 40 GR, its calculated version, dividend reinvestment, is now cruising at over 24,000 points, more than tripling.
For many experts, barring a major and unexpected event, the CAC 40 should not stop there. Despite their remarkable growth, “ CAC 40 companies remain cheap. The earnings multiple (PER), around 13, is lower than their historical average of around 14 »Take note of the experts at Goldman Sachs.
