The Paris Stock Exchange has started 2025 strongly, with the CAC 40 index nearing its all-time high, driven by defense stocks and significant gains from companies like Thales and Dassault Aviation. Interest rate cuts by the ECB and a favorable global economic outlook, particularly from the U.S., have further supported market growth. As earnings season progresses, French firms are reporting solid results, enhancing investor confidence and prompting a shift in portfolios away from overvalued U.S. stocks.
Strong Start for the Paris Stock Exchange in 2025
After a lackluster performance in 2024, the Paris Stock Exchange has kicked off 2025 with impressive momentum. The CAC 40 index shattered its previous all-time high of 8239.99 points set on May 15, 2024, during a trading session on Monday, driven primarily by robust defense stocks. Ultimately, it closed just shy of that peak at 8199.7 points, marking a notable increase of 1.09%.
Key Drivers of Market Growth
In Paris, notable gains were observed with Thales rising by 16% and Dassault Aviation by 14.8%. European Commission President Ursula von der Leyen announced plans to unveil a strategy for “rearming Europe” at a special EU summit in Brussels this Thursday, further energizing the market.
Since the year began, the Paris Stock Exchange benchmark has surged over 11%. Following a brief dip in early February amid the trade tensions initiated by Donald Trump, the CAC 40 made a remarkable recovery, comfortably surpassing the 8000-point threshold—a level it had dipped below on June 10, following the dissolution of the National Assembly by Emmanuel Macron. From its low point in early August of the previous year, when it was close to 7000 points, the index has risen by more than 15%.
The Paris market is buoyed by additional strong factors, including interest rate cuts implemented by the European Central Bank (ECB) since June. These cuts have been beneficial for stock markets, as they reduce borrowing costs for companies and redirect investments from bonds to stocks, which are now seen as more attractive.
This year, European markets, especially the Paris Stock Exchange, have gained from a portfolio rotation among investors who are increasingly wary of the high valuations of major Nasdaq companies. In contrast, Wall Street has underperformed, with the Standard & Poor’s 500 Index achieving only a 3.5% increase since January 1, and the Nasdaq seeing a marginal gain of just under 3%. The lack of government censorship and the successful adoption of the budget have also reassured investors.
Recently, the CAC 40 has benefited from the strong performances of leading French companies. Luxury powerhouse Hermès, for instance, reported record results for 2024, with net profits climbing 6.8% to 4.6 billion euros and sales exceeding 15 billion euros, a 13% increase. As the annual earnings season unfolds, many companies are showcasing solid results, with analysts anticipating generous dividends and substantial share buyback programs.
Furthermore, the global economy, which serves as the stage for the major multinationals listed in the CAC 40, has demonstrated remarkable resilience, particularly driven by the robust performance of the U.S. economy. Contrary to expectations of an impending recession, the U.S. economy grew by 2.6% last year and is projected to maintain a close growth rate of around 2% this year, according to the IMF. The election of Donald Trump also provided an additional boost to American markets at the end of the last year, positively impacting European markets, especially French stocks.