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The CAC 40 has lost 10% of its value since early August, primarily due to a sharp increase in France's 10-year bond yield. The yield has climbed by 1.4 percentage points, reaching near 5%, which is higher than yields in other countries. This rise in borrowing costs has made financing more expensive for companies, leading to a decline in stock prices. Despite the recent dip, there are opportunities for investors in sectors less sensitive to interest rates.
The CAC 40 has plunged from its historical high on August 7, losing 10% in less than two months. This drop is largely due to the sharp rise in France's 10-year bond rate (+1.4 percentage points since June), which has increased faster than other countries'.
The high inflation (+3.8% in September), strong U.S. economic growth, and significant debt issuance by tech giants have all contributed to this rate hike. The widening spread between French and German bond rates (1.6 percentage points) indicates growing perceived risk for France. As borrowing costs rise, companies' financing becomes more expensive, negatively impacting the stock market.
Despite this, 'Momentum' successfully predicted the CAC 40's fall and continues to outperform the index, offering insights into which sectors and stocks to consider for future investments.
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