Risky assets are set to suffer the most in France as total retail and savings investment is forecast to see negative growth in 2020 for equity holdings, according to GlobalData, a leading data and analytics company.
COVID-19 is having a major impact on the French economy, as it contracted by 6% over Q1 2020, and is expected to further decline by 1.5% GDP for every two weeks of confinement. This has led to GlobalData revising its total market forecasts from growth of 2.8% over the year down to -0.6%. Similar to other countries, the market is expected to see consumers move to the safest possible forms of savings, so retail deposits will be the beneficiaries, while risk assets will lose out.
GlobalData’s senior wealth manager analyst, Heike Van Den Hoevel, commented: “GlobalData has lowered its retail equity and mutual fund holdings forecast to -24.6% and 9.4%, respectively, for 2020. This will lower the combined contribution of asset classes in the retail mix from 27.1% at the end of 2019 to a forecasted 22.7% at the end of 2020.
“The CAC 40, the country’s flagship index, lost a quarter of its value in March, as the government put the economy into a deep sleep. While the index recorded positive growth at the beginning of April on the back of slowing infection rates in the wider region, the ongoing loss of productivity means that we are affecting a slow economic recovery. This will affect stock market performance and thus retail holdings over the forecast period.
“Retail deposits, which make up the vast majority of retail holdings, are set to benefit from a flight to safety away from risk assets, as well as a move away from cash holdings. Cash use has already essentially evaporated and this, combined with risk aversion is expected to lead to retail deposits rising by 5.3% over 2020.”