The fall in French stocks and government bonds after President Emmanuel Macron dissolved the National Assembly and called a snap legislative election has subsided, but investors remain worried ahead of Sunday’s vote.
Recent polls suggest that the far-right National Rally (RN) party, led by Jordan Bardella, could win the largest number of seats in the National Assembly, followed by the left-wing New Popular Front (NFP) alliance.
The centrist alliance, which includes Mr Macron’s Renaissance party, would come third. The first round on Sunday will be followed by a second round on July 7 and could result in a Parliament without a majority.
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This uncertainty, combined with the political promises of the RN and the NFP, which worry the economic world, weighs heavily on the markets.
CAC 40 Heading For Its Worst Month Since May 2023
Indeed, the is heading towards its worst month since May 2023, with the big banks Société Générale and BNP Paribas (EPA:) which have for example lost nearly 19% and 11% respectively since the beginning of June at Thursday’s close.
The gap between French and German 10-year bond yields has also widened to more than 71 basis points since Macron’s announcement, its highest level in more than a decade.
The National Rally “has been busy moderating its political stance on all fronts – in a nod to the strategy that got Giorgia Meloni elected in Italy in 2022,” said Viraj Patel, senior strategist at Vanda Research, in a note Wednesday cited by CNBC.
While the initial plunge in French stocks was driven by fears of populist policies introduced by the National Rally, “it is the policies of the new left alliance that have most disrupted markets in recent days,” Mr Patel added.
These include the increase in the minimum wage, the freezing of the prices of certain basic necessities for low-income households and the modification of income tax brackets, or even the cancellation of Mr Macron’s decision last year to increase the retirement age.
These policies could indeed have a profound impact on France’s finances, which remain very fragile, with a debt which amounts to 3,000 billion euros, which has already given rise to several downgrades on the part of rating agencies this year.
However, most political analysts agree that the most likely scenario is that a hung parliament fails to pass any major policies, and that the status quo prevails.
Thus, many are expecting a relief rally next week, if this scenario is clearly confirmed in the results of Sunday’s vote.
In this context, it may be wise to consider buying still undervalued French stocks before the rally starts.
12 CAC 40 stocks with an upside potential of more than 20% and solid health
In this regard, a search that we carried out with the InvestingPro+ screener allowed us to identify 12 other CAC 40 stocks that display an upward potential of more than 20% according to Fair Value as well as a health score judged “good” or better.
Remember that Fair Value is an exclusive indicator from InvestingPro which carries out an intelligent synthesis of several recognized valuation models for each market share, to provide a precise price objective. The Health Score is another proprietary metric from InvestingPro that takes into account several key financial metrics to assess the level of security and stability of a company.
- Note that half of these stocks display an upside potential of more than 30%.
- Furthermore, two of them benefit from a “very good” health score.
- Finally, what is not visible in the image above, two of the stocks on the list have a dividend yield of more than 6%.
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If you are already subscribed to InvestingPro+, you can easily find these stocks by reproducing the following search on the screener of their member area:
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