On the Paris Stock Exchange, equity volatility is making a comeback, with the CAC 40 chaining high-amplitude sessions as of this writing. In an environment that has become more anxious, which stocks could investors turn to, in the face of the specter of a possible further decline in prices? In the light of history, it seems appropriate to take an interest in French equities, whose trajectory was more favorable than that of the markets, during the downturns of the indices.
In this regard, the broker eToro has created a “basket of recession”, consisting of stocks such as LVMH, L’Oréal, and Hermès, Sanofi, Air Liquide, Capgemini, or even relatively defensive stocks such as the Ipsen laboratory and the giant Distillates Rémy. Cointreau. A basket of stocks that outperformed the CAC 40 significantly during the two notable bloodbaths of the past 15 years, namely the 2007-2009 financial crisis (24% outperformance) and the collapse of Covid-19 (outperformance of the 19.5%).
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This “basket of recession” in addition to having outperformed the stock market during previous recessions, has the notable advantage of having continued to perform well during the recovery phases. Over time, the trend of the “recession basket” is impressive, with a staggering 360% increase from the eve of the 2007-2009 financial crisis to the first half of 2022, compared with just 8% of the CAC 40 over the period. !
Many stocks in the recession basket “benefited during recessions from a combination of solid market positions and resilient final demand,” notes Antoine Fraysse-Soulier, head of market analysis at eToro. Specialized niche companies with defensive qualities can also be targeted, which can protect the investor from the impact of the deteriorating economy or enable him to benefit from long-term secular growth trends.
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More generally, in times of crisis, we can turn to sectors of activity capable of doing well, such as healthcare (whose level of activity is not linked to the vagaries of the economic situation and which benefits the duration of the aging of the population), basic consumption (sale of essential goods and services, such as agri-food and products for hygiene and maintenance) or mass distribution (with the downside of the negative impact on consumption of the erosion of the purchasing power of families).
We can also acclaim quality companies, such as our luxury and cosmetics giants, with very comfortable competitive positions and with an impressive ability to impose their prices on their customers.
Finally, you can add gold to a well-diversified portfolio. In fact, the yellow metal has historically been poorly correlated to stocks and tends to perform well during bear markets on stocks, which reduces overall portfolio volatility …
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Declaration of interests of the author