CAC 40 Index: Share Price, Chart and Forecast
The CAC 40 is the main index of the Paris Stock Exchange and is, therefore, the easiest way for international investors to invest or trade on the French stock market. In this analysis, we will explain in detail what the CAC 40 index is, how it is calculated, and its components and specificities, without forgetting to describe its historical evolution.
We will also look at the forecasts for the CAC40 to determine whether it is a wise investment. We will also provide several tips and tricks that will allow you to trade the index as efficiently as possible. Finally, we will explain how to invest in the CAC40 index easily, quickly and inexpensively.
What is the CAC 40 Index?
The CAC40 stock index is very popular with French investors, but it is also the easiest way for investors worldwide to access the French stock market. Let's study its basic characteristics.
CAC 40 Definition
CAC stands for “Cotation Assistée en Continu”, which means that its value varies continuously every business day from 9:00 am to 5:30 pm. It is updated every 15 seconds. The number 40 stands for the 40 of the top 100 French stocks making up the index.
Since December 1, 2003, the CAC40 has adopted the floating market capitalization system to align itself with the way the major world indices operate. This means that, since that date, the number of shares available for purchase on the market for a company is taken into account in the calculation of the index. The market capitalization of the company alone is no longer sufficient.
This has the consequence of favoring companies with a smaller capitalization and many shares available for purchase, over large companies still owned by the State for which few shares are available on the markets.
What Is the Purpose of the CAC 40?
The evolution of the CAC 40 is considered to reflect the general trend in the performance of large French companies on the financial markets. It is the most closely followed stock market index in Paris. Market participants interpret a drop in the CAC40 as a decrease in the health of the French economy (but as companies are increasingly internationalized, the evolution of the CAC 40 also reflects changes in the global economy).
CAC 40 History
Created in 1987, the CAC40 is the main stock market index of the Paris stock exchange. Its first listing was decided on December 31, 1987 but it became effective on June 15, 1988. As we will see below, the evolution of the CAC 40 price can be broken down into 6 major phases, including 3 notable crises that led to violent corrections: the internal crisis of 2000, the financial crisis of 2008, and the crisis related to covid-19 in 2020.
As far as changes in the index are concerned, the CAC 40 has undergone many changes in composition since its creation - 70 changes precisely. The last two changes in the composition of the CAC40 took place on September 21, 2020, when Alstom replaced Accor, and on September 17, 2021, when Eurofins Scientific replaced Atos.
The CAC 40 Index Price Evolution
This section will look at the historical evolution of the CAC 40 price by detailing the different phases of rise and crisis that the index has displayed since its creation.
CAC 40 Price Chart
The historical evolution of the CAC 40 index price since its creation can be divided into several phases, as shown on the CAC 40 chart below:
From its creation until September 1996, the CAC40 has shown a weak upward trend. Then, from 1996 to 2000, the CAC 40 recorded 4 years of a powerful uptrend, seeing its value rise from around 2000 points to an absolute record of 6944 points which has not been reached again since then. The index thus saw its value multiplied by 3.5.
Following this record, the Internet crisis of 2000 gave way to a brutal downward trend that brought the CAC 40 to a low of 2,400 points in March 2003, a drop of 65% in less than 3 years.
The upward phase that followed this correction brought the CAC 40 to a peak of 6168 points in June 2007, a gain of 157% in just over 3 years. A correction followed before the 2008 financial crisis deepened the fall of the CAC 40 to a low of 2465 points in March 2009.
Since then, the index has been on an uptrend, having recently peaked at 6913 points, and although currently on pause, the underlying uptrend has so far sent no signal of weakening.
What Influences the Price of CAC40?
From a fundamental point of view, the evolution of the CAC 40 index is closely linked to the health of the French economy and, generally, to the health of the global economy, as many CAC 40 companies generate a significant proportion of their revenues internationally.
Thus, the monetary policy of central banks, or significant economic statistics such as GDP or the unemployment rate, can directly impact the CAC 40 price. Since the index includes 40 stocks, any news concerning these companies can also influence the CAC - especially when bad news or good news influences an entire sector.
CAC 40 Return on Investment
Like most diversified stock market indices, the CAC 40 has proven to be a particularly profitable investment over the very long term. Indeed, the average annual return of the CAC 40 since its creation in 1988 is 7.75% without dividends and 10.75% with dividends.
Moreover, the CAC 40 has posted a negative return in only 12 of the 33 years since its creation. The CAC 40's highest annual return was +51% in 1999, thanks to the internet bubble that burst shortly after that. Its worst yearly decline was in 2008, when it plunged 42% due to the global financial crisis.
The CAC 40 Companies and Constituents
This is a basket of 40 French companies. These companies are selected from the 100 French companies with the highest trading volumes. Each company has a weighting determined by its capitalization on Euronext stock exchange. The weighting of a stock's capitalization in the index cannot exceed 15%.
These stocks represent all sectors of activity. The CAC 40 companies are regularly updated to ensure that they are representative. Euronext's Scientific Advisory Board decides which stocks are included in the index and which are excluded. It is composed of experts who are independent of the stock market operator. They meet every three months or in the event of exceptional financial transactions, such as the merger of two companies.
The criteria used are twofold: the volume of transactions in the company's stock and the representativeness of the sectors of activity.
CAC 40 Composition - List of Companies
Find below a table listing all the CAC 40 list of the 40 stocks composing the index.
CAC 40 Company Name
|Air Liquide||Basic Materials||AI|
|BNP Paribas||Financial Services||BNP|
|Crédit Agricole||Financial Services||ACA|
|Hemès International||Consumer Cyclical||RMS|
|Pernod Ricard||Consumer Defensive||RI|
|Société Générale||Financial Services||GLE|
|Unibail Rodamco||Real Estate||URW|
This CAC 40 list show how much the index is diversified among various sectors. Investors also like to follow the CAC 40 share price individually to have more details about which stocks are moving the most inside the index.
Should I Trade the CAC 40? Points to Consider
The CAC 40 is an investment vehicle suitable for investors of various profiles, thanks to these characteristics and strengths:
- Volatility: Like most of the world's stock indices, it offers sufficient volatility for day trading.
- Diversification: Because it includes the stocks of 40 French companies in various sectors, it is a highly diversified investment - something that risk-averse and long-term investors will find appealing.
- Dividends: Depending on how you invest in the CAC 40, it is possible to receive dividends. This will not be the case with CFDs, but CAC 40 ETFs will entitle you to dividends.
- Leverage: Trading the CAC 40 index via CFDs gives you access to significant leverage with most brokers, which multiplies the potential of trading opportunities.
- Short positions: With CAC 40 CFDs, it is also possible to short the index, which means that you can make money when the CAC 40 index goes up, but also when it goes down.
How Can I Trade the CAC 40?
It is sometimes difficult to choose an online broker as there are so many. Among the regulated, efficient and reliable brokers is ZFX, where you can buy CAC 40 Index easily and quickly.
ZFX, a World-Cass MT4 Broker
ZFX was created in 2018. However, its seriousness is not to be questioned, as the FCA regulates it.
This broker provides its clients with the MT4 trading platform, which is the most widely-used globally thanks to its many technical analysis and automated trading advantages.
There are different accounts available at ZFX, with various leverages and minimum deposits. This allows traders to better personalize their experience. Finally, it is worth noting that ZFX offers its clients to trade stocks, indices, forex and commodities.
How to Trade the CAC 40 Index Easily
Buying CAC 40 Index through ZFX is simple and fast. Indeed, the account opening is done entirely online, and takes only a few minutes. All you have to do is follow these steps:
- 1 - Register with ZFX
- 2 - Verify your ZFX account
- 3 - Make your first deposit
- 4 – Trade the CAC 40 Index
1 - Register with ZFX
First, go to the ZFX website, and click on "Open an account". You will then have to fill in a registration form with several personal details, including your phone number, which will be verified by SMS.
Then, click on "Next" at the bottom of the page. Immediately after this step, ZFX will display your MT4 login and password, and invite you to download the platform.
2 - Make Your First Deposit
To do this, you will need to click on "Make a deposit" on the screen that is displayed immediately after registration.
You will then be asked to choose a payment method. For example, Mastercard:
On this screen you will be asked to indicate the deposit amount and then click on "Confirm Deposit". You will then be asked for your credit card information before the final payment validation.
3 - Account Verification
Finally, you need to proceed with the account verification by sending supporting documents.
As shown in the image above, you will need to upload the documents directly to the ZFX website.
4 - Buy CAC40 Index
Once your documents are validated, you will then be ready to buy CAC40 Index. You will be able to do so via the MT4 platform, provided by ZFX.
Tips and Things to Know Before Trading the CAC 40
This section condenses several tips and tricks that will help you start trading the CAC 40 in the best possible conditions.
- The CAC40 officially opens at 9am and closes at 5:30pm every day. For short-term trading, it is generally not advisable to trade in the first hour or the last hour.
- There is a CAC 40 future and CFDs that allow you to trade the index before the open and after the close.
- CAC 40 traders need to learn the basics of technical analysis to analyze trends and spot signals.
- It is essential to follow the French and international economic news to assess the outlook for the CAC 40.
- Most online brokers, including ZFX, offer demo accounts that allow you to practice trading the CAC 40 without risk.
- Find a good chart provider with a CAC40 live feed. Here also, ZFX offers what you need
- You should follow the CAC 40 index live even if you’re investing long-term, because short-term movements can give you clues about the big picture.
CAC40 Future, Forecast and Predictions
This section will look at forecasts for the CAC 40 index from several angles, namely fundamental analysis, technical analysis, and analyst recommendations.
Recommendations and Forecast on CAC 40 of Analysts
Only a few analysts officially provide forecasts for the index. However, to determine analysts' opinions, we can rely on their opinions about the individual CAC40 stock that make up the index.
According to Factset data, the average analyst recommendation is positive for 39 of the CAC 40 stocks. Only Hermès does not have a buy recommendation, as it has a neutral rating.
Therefore, we can conclude that the analysts' opinion is clearly bullish for the CAC 40 index over the next 12 months.
Analysis of CAC40 from a Fundamental Perspective
As global economies slowly start to recover from the covid-19 pandemic, good news will likely outnumber bad news in the coming months, both at the microeconomic and macroeconomic level. This should help the CAC 40 price to rise.
Indeed, the economy's recovery should lead to a drop in unemployment and a return of investor confidence, which should lift the Paris stock market as a whole. The CAC40 is the preferred measure of the Paris stock market.
Technical Analysis of CAC40
We have already pointed out that the long-term trend of the CAC40 visible on the monthly chart is clearly bullish. Below, we will focus on the trend of the index and the thresholds to watch in the shorter term, basing our observations on the weekly CAC40 chart.
This chart confirms the current positive trend for CAC40 with a bullish channel visible since mid-2020, as part of a rebound from the initial impact of the covid-19 pandemic.
Indeed, while it was moving towards 6100 points in mid-February 2021, the CAC 40 bottomed at 3632 one month later. It then took the CAC 40 one year to reverse this month's decline, after which the CAC continued to advance within its uptrend channel.
Recently, the CAC 40 posted a correction from the upper bound of this channel, which does not call into question the uptrend. Indeed, it can be estimated that only a break below 6,000 points would call into question the bullish bias of the weekly CAC 40 chart.
Bottom Line: Should I Invest in CAC 40 Now?
The CAC40 index can be of interest to many trader profiles: day traders, but also long-term investors, for whom the CAC 40 is the most practical way to bet on the French economy. The index has recently approached its all-time highs and maintains a robust upward chart trend, confirming that it is an investment you should be interested in.
It is also interesting to note that professional analysts are positive on almost all of the CAC40 stock that make up the index, which means that the analyst consensus is very clearly bullish.
If you think that the CAC40 could be an suitable addition to your portfolio, we invite you to find out more about the broker ZFX. Indeed, for many of the reasons discussed in this guide, it is arguably one of the best brokers for trading the CAC 40 index.