The CAC 40 index has pulled back in the past few days as investors reflect on the latest interest rate decision by the European Central Bank. It was trading at €6,490, which was about 5% below the highest point in December. Year-to-date, the index has declined by 9.72%, meaning that it has outperformed the DAX and Nasdaq 100.
Most CAC 40 companies have been in the red in 2022. However, a few of them managed to rise even as business conditions worsened. Thales stock price jumped by over 59% as demand for weapons increased following Russia’s invasion of Ukraine. This is notable since Thales is one of the leading players in the aerospace, space, transportation, and digital security in the world. We saw a similar performance in companies like Lockheed Martin and BAE Systems.
TotalEnergies share price spiked by more than 29% in 2022 as demand for oil and gas rose. Still, the stock underperformed its American peers like ExxonMobil, Chevron, and Occidental Petroleum. Analysts cite the company’s investments in clean energy as the cause.
Other top performers in the CAC 40 index were Safran, Publicis Groupe, Renault, Engie, and Sanofi. All these stocks rose by about 5%.
Many CAC 40 index constituents dropped sharply in 2022. Teleperformance was the worst laggard in the index as its stock crashed by over 44%. Teleperformance is a company that provides customer relations solutions to companies like Santander, Wish, and Grubhub.
The other top laggards in the index were Eurofins, Dassault Systemes, Kering, Michelin, Alstom, and Capgemini. All these shares crashed by over 30%. Other top laggards in the index were Veolia, Worldline, Societe Generale, and Credit Agricole.
France stocks have a high possibility to recover in 2023 because of their global exposure. Companies like Hermes, Vivendi, Kering, and LVMH make most of their results abroad. Therefore, while their exposure in Europe is significant, their global business will likely help them outperform,
Unlike indices like the S&P 500 and Nasdaq 100, CAC 40 index has no major exposure to growth stocks. Instead, most of its companies are value names that are highly profitable. Brands like LVMH, L’Oreal, and TotalEnergies will likely do well.
The main risk for the index is the overall underperformance of the European economy. As the European Central Bank (ECB) ramps up its rate hikes, there is a likelihood that it will drag the bloc’s economy to a recession. A recession will likely have an impact on the index.
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