The grayness seems to have settled in Paris for a while. In the red in 2024, the CAC 40 index is currently moving more than 1,000 points – or around 12% – from its historic peak last May. Meanwhile, records continue to rain down on Wall Street. Look for the error. This “underperformance”, as market professionals say, is not new; the appetite for stocks is historically much stronger on the other side of the Atlantic. It is also not unique to the French capital. On a European scale, outflows from equity funds, including London, reached 50 billion euros over the last twelve months, while their American equivalents attracted 62 billion euros, Morningstar figures. And the blows become more insistent.
In Paris, the controversy raised at the highest level of the State around a second listing of TotalEnergies on Wall Street has left its mark. The prospect of seeing Vivendi, another flagship of the CAC 40, dispersed between Paris, London and Amsterdam, further shakes certainties. Not to mention the American dreams of European unicorns. In this context, the return of Donald Trump sounds like a tocsin. The session of November 6 alone reflected this flight from East to West: while the Euro Stoxx 50 – the index of the champions of the euro zone – fell by 1.4% on the day of the Republican candidate’s victory. , the S&P 500 jumped 2.5%.
Corporate tax cut
The markets are making no mistake: the 47th President of the United States fully intends to pursue a pro-business policy. Its roadmap provides for a reduction in corporate tax for companies producing on national soil, from 21% today to 15%. However, “one of the reasons for American outperformance is its ability to innovate. A study showed that the reduction in taxation implemented under Trump’s first term in 2017 had enabled medium-sized companies to invest more This will strengthen the technological advance of American companies, already favored by the low cost of energy,” said Christopher Dembik, economic advisor to the management company Pictet AM.
The planned increase in customs tariffs, a key point in the economic program of the future tenant of the White House, will also contribute to widening the gap. Donald Trump has promised to tax Chinese products at 60%, and those from the rest of the world at 10%. The threat is therefore twofold. European exporters will be affected directly, losing competitiveness when they produce on their soil and sell their goods in the United States, but also indirectly because China, where activity is already slowing down, constitutes an important outlet for some of them. . In these conditions, the loss of speed of the Parisian market does not make a difference according to Christopher Dembik. “There is no interest today in investing on the French stock market compared to the American stock market. Why risk exposure to companies more dependent on China and which will face an increase in taxation ?”
Thorn in France’s foot
This is the thorn too many, the one that France is digging itself into. If all European capitals are affected by a structural disaffection in favor of Wall Street, the German Dax, the British FTSE and the Spanish Ibex for their part show positive performances in 2024, unlike the CAC 40. And for good reason, investors did not wait for the presentation of Michel Barnier’s budget and the flurry of parliamentary amendments intended to increase existing taxes or create new ones to cast off. “In our equity portfolios, managed on behalf of our clients, we had already reduced our positions in France since the political crisis resulting from the dissolution. We have reinforced our ‘United States’ bias with the election of Trump,” testifies Grégoire Kounowski, investment strategy advisor at Norman K, a wealth management specialist.
Based in New York, Mathieu Chabran, co-founder of asset manager Tikehau Capital, adds: “I spend time meeting investors in the United States, Asia, the Middle East. There are more and more questions about investment in Europe, the share of which in their allocation has shrunk dramatically. The election of Trump is the final blow. The French boss fears that the Old Continent has “entered a long polar winter”. Sluggish growth, political uncertainties, regulatory straitjacket, more expensive energy… On a financial level, the “Europe” discount is increasingly reinforced. That is to say that with similar profile, level of activity and results, European companies are worth less on the stock market than their counterparts across the Atlantic. TotalEnergies can attest to this, facing the Texas oil companies. Airbus too, vis-à-vis Boeing. Ditto for Novo Nordisk and Eli Lilly. The list is long. This handicap is not neutral: “American companies that want to grow, make an acquisition, have greater financing capacity,” points out Roland Kaloyan, head of European equity strategy at Société Générale CIB. And can thus accentuate their lead.
“Not everyone is made for the Nasdaq”
From there, for European companies, to take the plunge and aim for a listing on Wall Street… Patrick Pouyanné’s group has put its feet in the dish, and “this movement is a warning. The risk would be that a luxury company also launches into a double listing, it would be a very bad signal,” judges Alexandre Baradez, market analyst at IG. The New York market also makes the eyes of start-ups shine with a view to tech. As Roland Kaloyan points out, “there are more investors ready to take risks, in younger, more innovative companies”. Beware of disappointments, however, not everyone is made for the Nasdaq, warns Charles-Henry Gaultier, managing partner at Lazard: “It is sometimes better to be a player of significant size in a given market, rather than a small player in a larger market. The investment banker adds: “It is very difficult for a company whose majority of turnover is in Europe to list there and attract investor interest.”
Is it still possible to turn the tide? “European companies preparing their IPO will continue to do so in Europe, where they have the best visibility with international investors and the best liquidity, that is to say on the integrated European market of Euronext, wants believe the president of the platform, Stéphane Boujnah Nevertheless, this election reminds us that Europe must quickly put itself in battle order to create more competitiveness and more growth, by working more and innovating more. greater integration of capital markets in Europe.”
In the meantime, the economist at the Lombard Odier bank, Samy Chaar, is counting on a favorable wind at the macroeconomic level. “There is a limit to underperformance. The euro will fall, the European Central Bank will reduce its rates more than the Fed, we are seeing a gain in purchasing power in Europe… If the NextGen EU fund (Editor’s note : the 2020 European recovery plan) was multiplied by three, this would benefit European stocks!” We will still have to convince the German champions of the rigor of the benefits of going into debt to invest. Another challenge for Europe.
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