2019 saw a whole series of major events that affected stock market volatility. The US-China power struggle, the about-turn by central banks, the year-end rally plus of course the uncertainty surrounding Brexit all impacted financial markets.
The trade war as background: the financial markets moved throughout the year in response to trade negotiations with uncertainties regarding the imposition of trade tariffs by the US government on a range of goods from China, in particular industrial components and technological goods
Reversal by central banks: faced with the possibility of a global recession, central banks took the lead. While expectations were that they would progressively raise the cost of money, the economic slowdown and fears of a recession spurred them into changing tack. The Federal Open Market Committee decided three times during the year to cut the key lending rate by a quarter point (0.25%) to a range of between 1.50% and 1.75%. Europe came to the same conclusion: Mario Draghi ended his period as ECB President on a very accommodative note and thereby relaunched quantitative easing (QE), which consists of buying sovereign debt and will continue “as long as necessary”. These highly accommodative policies, which are intended to underpin growth, have very concrete consequences. Globally, there are USD 17,000 billion in negative rate instruments.
Brexit postponement: following months of discussions and the resignation of Theresa May in June, Boris Johnson agreed to postpone Brexit to January 31. Given his lack of a strong majority in the Commons to approve his draft agreement, early elections were called for December 12, 2019.
Market at the highest level in a decade: Geopolitical uncertainties and the possibility of a recession didn’t dampen investor risk appetite. Major stock markets hit multi-year highs or in some cases historic highs (US indexes in particular). The CAC 40 ex-dividend rose 28.5% in 2019, driven by cyclicals and in particular a major rebound in bank stocks since the summer. This rise came on the back of a combination of technical and fundamental factors, and seems cut off from the real economy. Without going into detail regarding the fundamental reasons for the rise in risk asset prices, which go beyond merely low or negative interest rates, it should be noted that to some extent “capital flows” underpinned global equity markets in October and November with an increase in equity allocations in assets under management, which had fallen to 10-year lows, as well as a reduction in the relative weighting of cash.
As regards the Media sector, 2019 reflected the three previous years, with professional publishing and counter-cyclical stocks like Pearson lagging behind (-33%) followed by SES (-30%). As regards the agencies, share price evolutions were a mixed bag,with WPP enjoying a marked rebound(+26%) following a sharp decline in 2018 (-35%). The performance of Publicis (-19%) reflects a year of transition that saw well identified challenges (attrition, repositioning of Publicis Sapient in the United States, sluggish media performancein the second half of the year) resulting in the guidance regarding organic growth being revised during the year. For Publicis, 2019 also saw the acquisition of Epsilon, which was completed on July 1, 2019, and the confirmation of sound financial targets and deleveraging within four years. The US agencies grew by around 10%, although broadly under-performing the market; their organic growth (2.8-3.3%) nevertheless remained close to historic levels, once again helped by less exposure than the European agencies to non-food consumer product companies and greater exposure to the healthcare sector.
Publicis Groupe’s financial communication is based on the principle of providing precise, transparent, true and fair information on the Group’s situation to all financial markets within the framework of the current texts, standards and procedures in France: the Financial Security Law, the IFRS (International Financial Reporting Standards). The Publicis Groupe Investor Relations Department maintains a close, ongoing dialogue with both brokerage company and investment fund analysts. Publicis Groupe’s financial communications with institutional investors is reflected in the organization of meetings in the world’s major financial markets, and by the participation of Group representatives at investor conferences.
In 2019, Publicis Groupe met with close to 700 institutional investors in Europe, the United Kingdom and the United States, at roadshows and industry investor conferences in Europe and the United States
