CAC 40 under pressure: Why France is falling behind in the stock market comparison

CAC 40 under pressure: Why France is falling behind in the stock market comparison

What is the current performance of the CAC 40? The Paris index is lagging behind its European counterparts, recording only a modest gain of 6% since the start of 2025. The major indices in Europe are completely different: DAX 40 in Frankfurt rose by 22%, the IBEX 35 in Madrid by 20.8%, the FTSE Mib in Milan by 17.2% and the FTSE 100 in London by 9.4% [ tradingsat.com ]. The nervousness on the markets is noticeable, not least due to political uncertainties in France following the dissolution of the National Assembly in June 2024.

Numbers don't lie: Wall Street has now overtaken the Paris market, and the S&P 500 (+6.4%) and the Nasdaq Composite (+6.8%) are also ahead [ boursorama.com ]. The reasons for the CAC 40's weak performance are varied. There are problems in the luxury segment, which accounts for about 30% of market capitalization: with companies like LVMH and Kering down 23.2% and 17% respectively, the sector is under pressure. However, analysts are optimistic about a possible stabilization of the Chinese economy, which is considered an important sales market.

Political chaos and uncertainty

The political situation in France seems like a block in the leg. The current decline in the CAC 40 of almost 10% since the government crisis under President Emmanuel Macron shows how badly the stock markets are suffering from the political chaos [ nzz.ch ]. Prime Minister Michel Barnier failed to get a budget through parliament, resulting in the resignation of his government. In this situation, a political vacuum could bring short-term stability, as Parliament does not find much room for maneuver until possible new elections in the summer.

In the financial world in particular, attention is focused on French government bonds. The spread between France and Germany's 10-year government bonds is around 70 basis points, a sign of ongoing market concerns. Public debt is estimated at 5.6% of GDP for 2025, which is comparatively high compared to other European countries [ tradingsat.com ].

Future outlook and market developments

Despite the bleak outlook, there is a glimmer of hope in some circles. Analysts believe that problems in the luxury segment (so heavily dependent on China) could improve in the long term. The French stock market may stabilize if the Asian economic situation improves, which could get the luxury wedge rolling [ nzz.ch ].

Although French banks are under pressure at the moment as they are heavily invested in government bonds, political risk is seen by many market observers as already “priced in”. That could make the CAC 40 look attractive in the long term. The prospects for French government bonds are also better, especially since major rating agencies confirm good quality.

Overall, the situation on the stock market in France looks anything but rosy. With muted growth and an unstable political climate, the CAC 40 is an index that many investors are skeptical about. It remains to be seen whether the market will stabilize.