(News Bulletin 247) – American bank strategists explained, in a note published this Tuesday, that even if it suffers compared to other stock indices, the CAC 40 is not attractive. The establishment notes that its valuation remains relatively high.

The CAC 40 may have had eight consecutive sessions of increases at Monday’s close, but it remains completely behind the other major European indices. Since the start of the year, the Paris Stock Exchange barometer has been moving in the red (-1.36%), which is not the case for any other major European stock market. To give an idea, the Stoxx Europe 600, a pan-European index, increased by 8.8% over the same period.

The reasons for this violent underperformance are well known. As we explained in a previous article, the Parisian index is penalized by the political instability that France has been experiencing since the dissolution of the National Assembly last June.

It is also weighed down by the impact of the deterioration of the Chinese economy on the activity of major luxury players, whose weight remains significant within the index. LVMH, Hermès, L’Oréal and Kering together account for just under 33% of the total market capitalization of the CAC 40.

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A still expensive index

Can the Parisian market catch up? Goldman Sachs looked into the issue this Tuesday. The American bank notes, in passing, that the CAC 40 is currently showing its worst underperformance compared to the Stoxx Europe 600 since 2010. “Large international companies have suffered from China’s weakness and small domestic companies have been affected by increased political uncertainty,” she summarizes.

However, the American bank does not find the “return-risk” couple on the CAC 40 “attractive”. The establishment notes that the underperformance of the index was largely driven by the deterioration of the fundamentals of the companies making it up.

Thus, this underperformance was caused by downward revisions of company profit forecasts (especially those in luxury) and not by a correction in valuations and therefore stock market multiples. And Goldman Sachs is not optimistic for the future, the bank having an “underperformance” recommendation for consumer products (luxury) and energy, sectors which are very present in the CAC 40.

In addition, the valuation of the CAC 40 remains “high compared to its history”, explains Goldman Sachs. The Paris index currently trades for 14 times expected earnings over the next twelve months, compared to a 20-year historical median of just above 13, according to the bank’s data. In comparison, the Ibex, the FTSE 100 and the FTSE Mib, the main indices of the Madrid, London and Milan stock exchanges, all three display valuations lower than this median over 20 years.

Interesting point: the Goldman Sachs note also makes it possible to identify, in an infographic, which French sectors have most underperformed or outperformed their European counterparts. Certainly helped by Renault, the only European manufacturer with Ferrari to post a positive stock market performance in 2024 (+19%), the automobile sector recorded an outperformance of almost 20 percentage points. Conversely, technology, telecoms and even banks are underperforming by more than 20 percentage points.

Furthermore, Goldman Sachs strategists estimate that the OAT-Bund “spread”, i.e. the yield gap between the 10-year French bond and that of the same maturity from Germany, a thermometer of stress on the French debt, expected to remain “volatile” in the coming months. They are counting on an OAT-Bund “spread” of around 70 basis points (i.e. 0.7 percentage points) at the end of 2025, compared to 74.8 points at present (and around 54 basis points at the start of year).