French Stock Market: CAC 40 Recovers to Pre-Crasher Heights, Sustainability of Uptrend in Doubt
Rebounding CAC 40: Can It Keep Climbing?
After a tumultuous months-long plunge following Donald Trump's tariff announcement, France's CAC 40 index has bounced back, erasing its losses and hitting its April 1st peak just a fortnight ago - a recovery that's a testament to a golden rule in stock trading: don't sell in a panic. But will this rebound persist until year's end? Quentin Bas Lorant, our finance journalist, weaves through the Paris Stock Exchange's recent rollercoaster and sheds light on the factors likely to drive the index in the days ahead.
The CAC 40's swifter-than-anticipated recovery has defied the forecasts of another repeat of the 2020 stock market crash sparked by the first lockdown, which saw a staggering nearly -30% drop in two weeks. Antoine Andreani, head of research at XTB France, comments that the recent dip proved less severe than feared, with oversized declines staved off thanks to mass institutional reinvestment.
Long-term Perks of Stocks
Long-term investment in the stock market remains the financial darling, according to the latest study by the Institute for Real Estate and Financial Savings (IEIF). Since 2009, the combined major stock market indices have returned an average annual return of 7.8%, absorbing various market troughs such as crises in sovereign debt, Brexit, Covid-19, the war in Ukraine, and post-Covid inflation - just to name a few.
Yet, while the panic-triggered collapse seems to be behind us, will the CAC 40 continue to soar until year-end? The proverbial glass may still be half-empty, as Antoine Andreani cautions that the Paris Stock Exchange could see renewed spikes in volatility to close out the year.
For instance, a trade truce between the United States and China after 90 days could be tenuous, and unless a more sustainable agreement is reached, escalating tensions could spell trouble for the CAC 40. Similarly, the index might face volatility in relation to the European Union, with possible deterioration in US-EU relations to watch out for. Lastly, the anticipation of a decrease in direct rates from the Federal Reserve is keeping the US market's attention. A reduction in these rates remains elusive, delaying the hoped-for dip in inflation across the Atlantic.
Nonetheless, the overall trajectory remains bullish, with varying projections mapping out a potential range of values for the CAC 40 by year-end. Forecasts place the index between approximately 8,000 and 9,290, though exact figures depend on the source. Some foresee a more conservative rise to around 8,000, while others optimistically predict it could hit 9,290. Monthly forecasts indicate slight dips during the summer, followed by a steady climb towards year-end, with an expected value of around 7,601 in December.
Investors, analysts, and strategists share a collective consciousness:A smart strategy in the volatile stock market is to patiently ride out its ups-and-downs without reacting on impulse to bearish sentiments - in other words, resist the urge to sell in a panic!
Investors careful not to sell in a panic may find long-term investing in the stock market, such as the CAC 40, an attractive option, as the latest study by the Institute for Real Estate and Financial Savings shows an average annual return of 7.8% since 2009. However, Antoine Andreani warns the Paris Stock Exchange could see renewed spikes in volatility to close out the year, with potential instabilities from trade tensions between the United States and China, possible deterioration in US-EU relations, and lingering uncertainties over direct rates from the Federal Reserve.
