BofA Says France’s stock market is now the least liked in Europe

According to the bank’s most recent poll of fund managers in the area, investors were less likely to be overweight French stocks than any other in Europe over the next 12 months. This is a big change from May, when French stocks were their top pick. Instead, investors now prefer stocks and industries that are good for protecting their money.

A survey by Bank of America Corp. found that French stocks are the least popular in Europe because of President Emmanuel Macron’s choice to call an early election.

Views were taken from June 7 to June 13, which includes most of last week’s drop. That week, France’s CAC 40 Index dropped the most in over two years, wiping out $258 billion in market value.

On Tuesday, BofA strategists Andreas Bruckner and others wrote in a note that “France has become investors’ least favorite European equity market.” The CAC 40 benchmark lost all of its gains of 2024 last week, even though it had been reaching new highs just a month before. This made France’s stock market less valuable than the UK’s in the region.

The French Parliament will be voting two times on June 30 and July 7.
Investors are afraid that Macron’s moderate, pro-business Renaissance party will lose even more ground. The CAC 40 went up again on Monday as traders looked at Marine Le Pen’s promises that she would work with Macron if she wins the election.

When the market opened on Tuesday, French government bonds rose somewhat more than German counterpart. Although it is just around 77 basis points distant from that high now, the 10-year yield bond spread peaked this week at more than 80 basis points.

Still, European investors are most worried about the risks that come from France’s political unrest. This is why Citigroup Inc. analysts lowered their outlook for the region as a whole to neutral. According to BofA’s poll, investors are less optimistic about the future of European stocks going up this month. People still like them around the world; more investors polled said they were betting on the area more than the US.

Given the number of possible outcomes, Barclays Plc strategists think that price changes in European stocks will stay “erratic” until the second round of voting in France. They said that investors are worried about things like the chance that France’s government won’t be able to control the country’s politics and that the government won’t be able to pass any real laws to improve the country’s finances.