This is a first since its creation in 1987. The CAC 40 index, the main stock market index of the Paris Bourse bringing together forty jewels of the French economy, exceeded 7,000 points on Friday, November 5, shortly after the opening. , coming in at 7,018.31 points.
This week, the Parisian market has chained the records: the CAC 40 first surpassed Tuesday its closing record which dated September 4, 2000, standing at 6,927.03 points, against 6,922.33 twenty years ago. and one years), before dethroning, the next day, its all-time high reached in session the same day (6,948.27 points).
Support from central banks
The records of the Parisian index are due to “A favorable interest rate environment and solid corporate results in a context of strong economic recovery”, explains Daniel Larrouturou, equity manager of Dôm Finance. The Paris Stock Exchange and other stock markets have been buoyed in recent months by the support of central banks. The latter have made money flow freely since the spring of 2020 to ensure that a financial crisis does not add to the health crisis linked to Covid-19. The markets were also boosted, from November 2020, by the arrival of vaccines against Covid-19, which paved the way for a way out of the crisis.
The good results of companies in the third quarter, “With spectacular rebounds in many sectors, both in terms of activity and results”, underlines Mr. Larrouturou, then allowed the Parisian index to climb the last few steps.
End of unlimited liquidity
However, the era of virtually unlimited cash is coming to an end. The central bank of the United States, the Fed, on Wednesday formalized the reduction of its asset buyback program.
But the markets seem to be satisfied with this given that Fed Chairman Jerome Powell has assured that the pace of reduction in purchases is adjustable according to the economic situation and that it is not yet time to think about an increase in key rates.
Could the CAC 40 therefore continue to rise, when it is already showing an increase of 26% since the start of the year? “Very difficult to say”, for Frédéric Rozier, portfolio manager at Mirabaud. “The major risk is to have, at a given moment, high inflation and a drift in interest rates which would rise too quickly, too strongly and could do damage to the market”, he explains.
The currently low rates make bonds unprofitable and encourage investors to turn more to equities, which would conversely be less desirable in the event of a rise in rates.
Carrying luxury
The manager rules out, in any case, the risk of a bubble bursting as was the case in 2000. The record, reached after three years of rising values linked to new technologies, was followed by the collapse of valuations. of the dot-com bubble, resulting in a major crash. “The big difference compared to 2000 is that the market was concentrated on a few technology stocks, some of which have since disappeared. We were rather buying a perspective, specifies Mr. Rozier. Today the situation is different, what holds the market is real. “
Investors buy the shares of companies that are performing well, such as luxury goods or those linked to the energy transition. The sharp rise in luxury goods, which weigh more than a quarter of the Parisian price tag, has also contributed to the CAC 40 doing a little better since the start of the year than other major European markets or American. The LVMH group, which alone represents nearly 15% of the capitalization of the CAC 40, has taken 37% since January and Hermès, 67%. L’Oréal, which accounts for around 10% of the CAC 40, jumped 33%.