French stocks: ‘Buy when there’s blood in the streets’?

“Buy when there is blood in the streets” is one of the oldest maxims of investing. France, where riots have sent shopkeepers counting the cost of looting and investors worrying about spiking bond yields, is currently putting it to an unfortunately literal test. Right now, there’s no shortage of investors willing to wait for the blood to dry. Bank of America’s latest monthly fund manager survey shows a record number plan to underweight French stocks over the next year. Barclays says French shares are now some investors’ biggest short position, as they bet on further declines.French shares have lagged for years. Global equity indices have roughly doubled since the bull market began in October 2022, notes investment strategist Ed Yardeni, but the MSCI France index has risen just 36 per cent. READ MOREDown 5 per cent in 2026, France’s CAC 40 is on course for its biggest annual underperformance against the broader European market since 2010, having lagged for three consecutive years.Political risk is not the only driver – luxury stocks like LVMH and Hermès account for a significant chunk of the index, and they have struggled amid weaker demand for high-end products – but it is an important one. Goldman Sachs estimates around half of France’s underperformance against other European indices in recent years is explained by political risk.Given that only around 16 per cent of CAC 40 revenues are generated in France, the sell-off might tempt contrarians. Yardeni notes the French index’s price-earnings ratio has fallen from 16 in February to 13, even as corporate earnings have hit record highs. Analysts have raised their 2026 earnings growth forecast to 24 per cent.[ European stocks extend slide as French unrest rattles investorsOpens in new window ]“French earnings have decoupled from the French economy”, says Yardeni. French banks “warrant a discount; the multinationals don’t”.Of course, cheap stocks can also get cheaper. With the 2027 presidential election looming and France’s fiscal problems unresolved, cautious investors may prefer to ignore the advice to buy when there is blood in the streets and heed another market adage instead: don’t try to catch a falling knife.