Despite the war in Ukraine, tension in international trade with an unending health crisis in China, the surge in inflation linked in particular to soaring energy prices and the tightening of monetary policies, the The Paris Stock Exchange held up quite well last year.
Better than American places
Its flagship index, the CAC 40, bringing together the 40 most important stocks, recorded a drop of 9.5%, after a rise of 28.9% in 2021. This is less bad than most other European stock exchanges. The DAX index in Frankfurt thus lost 12.5% and the FTSE in Milan, – 13.3%. Only the places of Madrid (– 6.3%), Lisbon (+ 2.8%) and London (+ 0.9%) are doing better.
“Spain, like France, are two countries less sensitive to Russian gas. And in France, inflation is the lowest in the euro zone”, recalls Alexandre Hezez, head of strategy at Richelieu Gestion. The London Stock Exchange benefited from the good health of commodity producers.
Paris is also doing much better than the American stock market, which is very dependent on technological stocks which have not been at the party, after having progressed a lot in previous years. On Wall Street, the S&P 500 will have fallen 19.1% in 2022 and the Nasdaq 33.1%, the worst year since the 2008 financial crisis.
Historical profits for TotalEnergies
The resistance of the CAC 40 is primarily linked to the good health of a few French flagships, boosted by the current situation. This is the case, in the first place, of TotalEnergies which alone weighs 10% of the index. The action shows an increase of 31.4% for 2022. The group has obviously benefited from the surge in gas and oil prices, reaping historic profits, of 17 billion dollars (16 billion euros) on the first nine months of the year. The Engie share gained 2.9%.
Another big winner was the armaments sector, as the increase in geopolitical risks prompted investors to bet on shares in the defense sector. Thalès thus posted the strongest growth in the CAC 40 in 2022 (+59.5%). For the same reasons, the Safran stock is up 8.6%.
The revenge of defensive values
For its part, Sanofi (+ 5.8%) benefited from the attraction of investors for health, whose activity is less subject to the economic slowdown. This is also the case for other behemoths of the CAC 40, such as Air Liquide (-5%) or EssilorLuxottica (-9.6%), which are defensive stocks.
Ditto for Orange, (-1.4%) as well as luxury giants like LVMH (-6.5%) and Hermès (-5.9%). All of these companies suffer less than others from inflation, because they can pass on their rising costs to their customers. This is also the case of Vinci (+ 0.4%), with its motorways and which also benefited from the strong recovery of activities in airports.
Conversely, the financial sector was penalized by the rise in interest rates. The Societe Generale title lost 22.3%. It should also be noted that among the average values, stock market losses are a little more sensitive. The SBF 120 (the 120 most important companies on the Parisian coast) thus posted a decline of 10.3%.
The entry into 2023 is made in the fog
Most companies enter 2023 with a lot of uncertainty and the threat of a recession in Europe. And, as often, analysts are divided on the evolution of the markets.
Some highlight the resilience of large groups, which restored their accounts very well after the health crisis. In the first half of 2022 alone, the combined profits of the forty largest French groups reached 77 billion euros, up 30% year on year.
But the headwinds are numerous, with question marks on the Chinese economy, the evolution of the Ukrainian conflict or the impact of the rise in interest rates, which penalize the most indebted companies and divert investors equity markets in favor of bond markets.