Stock Market in a Faint: How Does the French Crisis Impact the Markets?

The French stock market is experiencing a period of turbulence since the announcement of the dissolution of the National Assembly and early legislative elections. Investors, worried about political uncertainty and its repercussions on the economy, have caused a drop in stock prices. This French storm does not spare other European markets, which are also experiencing the collateral effects of French political instability.

The French Stock Market Under Pressure

Last week, the CAC40 suffered a heavy drop of 6.3% in just five sessions, a major and rather rare event. This weekly decline is comparable to:

• the 10.2% drop recorded at the end of February 2022 after the Russian invasion of Ukraine,
• the 6.4% drop in October 2020 following the announcement of the second Covid-19 lockdown by Emmanuel Macron.

The most affected sectors are banking (-12% for the week) and concessions and public services (-11%), penalized by political uncertainties. This pressure is expected to persist until the verdict of the early legislative elections at the end of June.

According to analysts, this sharp decline reflects investors’ concerns about political turmoil in France. They are seen as a potential “black swan” likely to have major and unpredictable consequences on the economy.

What About the European and American Stock Markets?

The concern is not limited to France. The European stock market as a whole has taken a hit in recent days. In contrast, the American markets continue their ascent. The Nasdaq 100 even reached a new record last week with a rise of 3.5%.

However, this performance hides disparities. Only large-cap stocks like Microsoft, Apple, and Nvidia truly stand out. They have risen by 4 to 9%. Small and medium-sized enterprises struggle to keep pace.

The question now is whether the French stock market will be able to recover from this political storm. A rebound is possible, especially if the results of the legislative elections help dispel uncertainties and establish a stable government.