CAC40 index (PX1) : More solid than it looks?

It should be noted that the 10 main holdings ​​(which represent about 55% of the index) belong to very different sectors, unlike the DAX (overweight in industrial stocks) or the FTSE100 (pharmacy and financials), the CAC40 is indeed more composite in its sectoral composition.

However, three high-weighted stocks, Total (10.6%), Sanofi (7.4%) and LVMH (7.6%), can influence the index according to their own fundamental factors, which represents a bias.

From a sectoral point of view, we can see that the consumer goods sector represented by luxury goods and cosmetics such as LVMH or Loreal, is one of the most important for the index (17.5%), just behind industry (19.2%), financials (10.3%) and energy (11.4%).

The CAC40's stocks ​​are often world leaders with a very international exposure, and little dependence on the domestic market and with a strong sensitivity to the US Dollar.

The positive impact on French growth linked to the hopes for structural reforms as well as the lowering of corporate and capital taxes confirmed in 2018 are still far from being fully integrated. France is still in the middle of the cycle but its growth potential remains limited by excessive debt, falling unemployment but still too high and public spending among the largest in the world compared to GDP, which translates into a very high level of taxation, and heavy burden on businesses and households.

The medium-term potential of the index is significant, but is so far prevented by tough international context (trade war, FED) and EU politics (Brexit, Italy) and for a few weeks by internal issues (Yellow Vest). Financials should be key, as they could benefit from the gradual rise in long-term rates as growth resumes and higher inflation expectations, as is already the case in the US, coupled with a more favorable political context.

Instruments: CAC (Lyxor in Euro), C4D (Amundi in Euro), E40 (BNP Paribs Easy in Euro)