Societe Generale SA (EPA:GLE)’s Cross Asset Research published a research report yesterday suggesting that French President Francois Hollande’s recently announced supply-side economic reforms could lead to a boom in French equities. Hollande’s approval ratings have reached all-time lows over the last few months as the French economy continues to erode.

The report also lays out a series of remarkable parallels between the social and economic circumstances of France in 1983 when Francois Mitterrand instituted a successful series of economic reforms and Hollande’s moves toward reform today.

French equities: Hollande to walk a fine line

Hollande’s economic reform plan, which involves lowering corporate taxes and reducing individual contributions to social programs, require the French president to walk a fine line between his constituencies. Hollande calls it a “social pact” where the government gives businesses a break and businesses hire more workers in return. But this reduction in taxes will require a matching reduction in government spending, the majority of which will almost inevitably come from the social services sector, and the idea of further “austerity” is not going to go over well with working class and lower income French citizens.

French Equities

Parallels between the economic reform plans of Mitterand and Hollande

The Cross Asset Research report elaborates on the similarities between Hollande’s and Mitterand’s economic reform policies. “Mitterand announced his policy change during his New Year’s Eve address on 31 December 1982 (spending cuts of 2% of GDP); President Hollande flagged his shift to prioritising competitiveness on 31 December 2013, using near-identical language. Both opened the door to supply-side reforms, paving the way for increased competition and hence a better growth outlook.”

French Equities

The report also notes that Hollande began his political career as an adviser to Mitterrand back in the mid-80s, so it is not surprising he might consider taking a page from his old mentor’s book.

Reform likely to lead to French equities boom

The analysts at SocGen’s Cross Asset Research argue that Hollande’s economic reform policies will be well-received by most of the business and financial community in France, and in particular by the equity market. The report closes with reiteration of their rosy forecast for French stocks over the next few quarters. The predict the French CAC 40 (equivalent to the Dow Jones Industrial index) will reach 5100 by year-end 2014 and 7000 by end-2016.