It’s a historic day for the Paris Stock Exchange. The CAC 40 passed the symbolic threshold of 8,000 points in session this Thursday, March 7 at 2:30 p.m., a peak never reached before. In recent weeks, the flagship index of the Parisian market has been stimulated by the excellent results revealed by the champions of the CAC 40. While they had collectively pulverized their profits in 2022, with a cumulative net result of 144 billion euros , this indicator further progressed last year, to 147 billion euros for 38 groups in this flagship index. Investors’ good mood is also fueled by the promises of artificial intelligence and the prospect of a reduction in key rates from major central banks by the end of the year. “This is excellent news for the equity markets, it reduces the cost of debt for companies. It also tends to shift sums invested in bonds towards stocks which become more attractive,” explains an analyst.
Energized by these green lights, the CAC 40 thus broke the ceiling of 8,000 points on which it had been stumbling for several days. It now shows an increase of 5.5% since the start of the year after having already climbed 16.5% in 2023. Friday February 23, the CAC 40 had already reached 7,966 points for the first time in its history. Since then, it has been hovering around this level.
Apart from a few particular situations, such as that of ArcelorMittal whose results were hampered by the decline in the price of raw materials, most of the CAC 40 companies achieved feats last year. On January 25, after the publication of its 2023 accounts, LVMH shares soared by 12.8% and its capitalization jumped by 40 billion euros in a single session, unprecedented. If luxury remains the main driver of the CAC 40, many industrial companies are also in brilliant form. Thus, Air Liquide gained 8% on February 20 when it published its results. A surge for which this portfolio value is unusual. The market was dazzled by the results and prospects revealed by the industrial and medical gas giant. This week, this darling of individual shareholders became the eighth company in the CAC 40 to have a market capitalization of more than 100 billion euros.
Markets have always been fond of good stories and, for the past year, they have also been served by the promises of artificial intelligence (AI). The champions of the CAC 40 are also benefiting from this surge, which has boosted all the major stock markets. From commerce to finance, including medicine and most industries, virtually every sector of the economy is affected. Financials, such as BNP Paribas, Société Générale and the insurer Axa, telecom operators like Orange which have mountains of data, are of great interest to specialized managers. Air Liquide, again, is a leader in the supply of pure gases used for the production of chips.
Another powerful driver: shareholder return policies. In 2023, CAC 40 companies paid 97 billion euros to their shareholders, in the form of dividends (67 billion) and share buybacks (30 billion). They should be even more generous in 2024. Among the big names in the CAC 40, LVMH, BNP Paribas, Sanofi and even Air Liquide have all announced a significantly increased dividend. Share buyback programs are also increasing. On the occasion of its results, Axa unveiled a new plan of 1.6 billion euros, Michelin promises 1 billion, Carrefour 700 million and Stellantis, whose profits never cease to surprise, 3 billion.
The stock market may fluctuate with good and bad news, but paying regular coupons considerably increases the value of a portfolio over the years. The CAC 40 GR, its calculated version, dividends reinvested, is now sailing at more than 24,000 points, three times more.
For many specialists, barring a major and unforeseeable event, the CAC 40 should not stop there. Despite their significant increase, “CAC 40 companies remain inexpensive. The earnings multiples (PER), of around 13, are lower than their historical average of close to 14,” note the Goldman Sachs specialists.