It has been “a crazy year for the Bourse de Paris”, says Quentin Soubranne on BFM Bourse. France’s CAC 40 gained 29% in 2021, making it the world’s best performing major stockmarket. The gain is the index’s best annual performance since 1999, as a strong economic rebound and easy money from the European Central Bank (ECB) pushed it to record highs.
The pandemic has changed the composition of CAC 40, says Bastien Bouchaud in Les Echos. Once the preserve of banks and oil companies, today the index is increasingly dominated by luxury and industrial firms. Between them the four big French fashion groups (LVMH, Hermès, L’Oréal and Kering) have generated “more than half of the index’s gains over the past two years”. Unable to travel, the world’s wealthy have been splurging on luxury goods instead. Green energy industrial firms and France’s handful of tech companies are also growing fast.
European stocks have had mixed fortunes
Elsewhere in Europe, it was a good year for Amsterdam’s AEX (up 27.5%) and Italy’s FTSE MIB (up 23%), says Danilo Masoni on Reuters. Germany’s Dax (up 15.6%) was less impressive, while Spain’s Ibex lagged behind, managing to climb just 7.4%. The pan-European Stoxx 600 index finished up by more than 22%, its second-best showing since 2009 – although this still lagged the near-27% gain of America’s S&P 500 index.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The big question for 2022 is whether European stocks can finally beat the S&P 500, which has delivered superior returns for most of the past decade, says Nikos Chrysoloras on Bloomberg. Strategists at Deutsche Bank and Jefferies think they might. While the US Federal Reserve is poised to start hiking interest rates soon, the ECB has indicated that it is in no hurry to do likewise. That should provide more of a cushion for European stocks, as easy money usually finds its way into markets. Valuations in Europe are also less stretched than in America. US price-to-earnings multiples are now 10% above pre-pandemic levels, but those in Europe remain 20% lower.
Inflation risks
The outlook for the first part of the year is encouraging, says Martin Skanberg of Schroders. Eurozone corporate profits rose roughly 50% year-on-year in 2021, with companies able to protect margins by passing price rises onto consumers. The continent boasts plenty of “market leaders” in the popular green themes of “renewable fuels, electric cars or metals recycling”. The big risk is that with inflation running at 4.9% in November, the ECB may yet be forced to tighten monetary policy more quickly than expected. As elsewhere, that could spell the end of the stockmarket party.
-
Nationwide Building Society launches £175 switching deal – who is eligible?Nationwide Building Society has launched a new current account switching deal. We look at whether you are eligible, and how to get the free cash.
-
Barclays launches £500 cashback offer for ISAs - but there's a catch. Here's how it worksBarclays is looking to attract savers to its cash ISA range but you need a lot of money to get the full reward
-
Small UK industrial stocks are hidden gemsOpinion Ed Wielechowski of the Odyssean Investment Trust highlights three of his favourite British small-cap industrial stocks
-
Aurora Innovation is running on empty – is it overvalued?Aurora Innovation, a maker of self-driving trucks, may have promised far more than it can deliver
-
'Ride the recovery in emerging markets': Gustavo Medeiros of Ashmore Group tells MoneyWeekInterview What's the outlook for emerging markets? Gustavo Medeiros, head of research at Ashmore Group, gives his analysis and reviews progress in developing economies
-
What is the Enterprise Investment Scheme and should you have one?The Enterprise Investment Scheme is tax-efficient and potentially lucrative. Taking a chance on the scheme could trim your family’s IHT bill, says David Prosser
-
The alcohol industry is suffering as consumers sober up – is it still worth investing in the sector?Changing consumer tastes are rocking the alcohol industry, but the best players are adapting their strategies. Buy them while their shares are still cheap
-
A strange calm in creditCorporate bond markets remain remarkably relaxed, with yields that offer little compensation for risks
-
'The City's big bet on green finance fails to pay out'Opinion Insurers and banks are backing away from “green finance”, and there is not much sign of the green boom we were promised. That’s a problem for the City
-
Six top investment trusts for smaller stocksLiquidity constraints mean investment trusts are best placed to seize the juiciest opportunities
