(BFM Bourse) – The Paris Stock Exchange experienced meteoric growth in 2021, shattering records more than 20 years old, and outperforming other major global indices, with an increase of nearly 30% (29.21% at December 30).
2021 will keep a special place in the stock market annals of the Parisian market. At the close of December 30, i.e. before the last half-session of the day which should not generate any very pronounced variation, the CAC 40 posted an increase of 29.2%, corresponding to one of its best annual performances since its launch. creation in 1987, behind 1988 (+ 57.4%), 1999 (+ 51.1%) and 1998 (+ 37.3%) in particular. It is thus on the way to registering its largest annual increase since 1999, after limiting the breakage in 2020 (-7.1%) despite the sudden crash in March.
Paris is doing better than Frankfurt (+ 15.79% for the Dax 30, which became the Dax 40 in September), London (+ 14.59% for the FTSE 100), Milan (+ 23% for the FTSE MIB), but also than the three main American indices. If the S&P 500, benchmark index for US managers, set 70 new all-time highs at the end of this year, at the same time it has increased “only” by 27.3%.
The recipe for this magic potion? “Still accommodating central banks, the strong economic recovery and the strong rebound in consumption,” said Christopher Dembik, director of macroeconomic research at Saxo Bank, to AFP.
Whatever the sector, companies have been able to taste this sweet beverage: at the top of the CAC 40, we find banking Société Générale (+ 77%), luxury giant Hermès (+ 75%), technology Capgemini ( + 70%), or the water and waste juggernaut Veolia (+ 66%).
After a relaxation in January, the Parisian index experienced an almost linear progression until June. Cyclical companies, the most dependent on economic activity, such as banks, automobiles, industry, “pulled this first phase. We thought they would then run out of steam, but ultimately not,” notes Chaguir Mandjee, portfolio manager at Tailor AM.
The prices were then euphorized by “exceptional second quarter results”, which were confirmed in the third quarter, supports Charles de Riedmatten, manager at Myria. It is also the quarterly publications of the flagships of the quotation at the beginning of November that propelled the CAC 40 above 6,944 points, its previous absolute record dating from September 2000, until it peaked at nearly 7,200 points mid -November.
No alternative
The Parisian market nonetheless experienced several slackening times in 2021. In mid-July, then at the end of November, the Covid-19, and its delta and omicron variants thus generated notable declines, including a -4.75% in one meeting on November 26. At the end of the summer, doubts about the strength of the Chinese recovery, symbolized by the near bankruptcy of real estate giant Evergrande, had also rocked the markets. But “these declines were seen as opportunities to buy stocks at a low price,” said Christopher Dembik.
Meanwhile, central banks, led by the Fed and ECB, continued to massively support economies by pumping tens of billions of euros into the financial system each month, contributing to the bumper recovery this year. Between mountains of liquidity poured out by monetary authorities on the markets, interest rates at historic lows and soaring inflation, investors had little choice but stocks in 2021. This phenomenon has a name: the “Tina” effect, for “there is no alternative”.
“Not to be the last to sell”
But by going too far, don’t investors risk burning their wings? Faced with the surge in consumer prices, central banks reacted and started reducing their support measures. The Fed even announced that it would proceed with three rate hikes in 2022, and as many in 2023. The normalization of country growth and corporate results should also encourage investors to be more cautious, and little Observers see the ACC repeat such a performance in 2022. All the more so as health uncertainty persists, depending on the new variants.
“The year is nervous. The indices have risen well, nobody wants to be the first to sell … but nobody wants to be the last either” if a period of correction starts, analyzes Alexandre Neuvy, manager at Amplegest . He stresses “the need to take a breather” after the 2021 increases, and the fact that not everyone participated in the party. Seven CAC stocks ended in negative, the worst performance going to Worldline (-38%), sanctioned at the end of the year for bad choices according to investors.
Quentin Soubranne – © 2022 BFM Bourse