In 2025, French assets are underperforming compared to other European markets, particularly Germany, due to political instability stemming from President Macron's decision to hold snap elections. The French economy has faced slow growth and unmet challenges in public finances, deterring investors. While the overall European stock market is up, France's CAC 40 index has only risen marginally, and luxury goods demand from China has declined. Investors now prefer German stocks over French ones, reflecting a significant shift in regional investment sentiment.
In the past year, none of France's biggest problems have been tackled. The state of public finances is dire, economic growth is weak and there's no political visibility.
The CAC 40 forward price-to-earnings ratio now shows an 8% discount to the DAX, compared with an average 6% premium during the 10 years prior.
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