Financial markets had a euphoric summer. Are they too optimistic?

With compromises on tariffs, strong corporate earnings, interest rate cuts within reach, and hopes for a ceasefire in Ukraine, financial markets have had a good summer. In August, the Nasdaq, the S&P 500, and the Dow Jones all reached record highs. In Europe, the broad Stoxx 600 index is at its highest point since March, as is the CAC 40 in Paris, which surpassed the 8,000-point mark again on Wednesday, August 20.

Since January 1, the 40 main French stocks have risen nearly 8% – a respectable performance, although it lags behind other major European markets. London is up 14%, Frankfurt 22%, and Milan 26%. The CAC 40 has been held back by difficulties in the luxury sector, a significant component of the index, which continues to suffer from weak Chinese consumer demand.

Trade agreements reached by Washington with the EU and Japan, as well as the extension of the trade truce with China, have contributed significantly to the overall performance of equities following the downturn that occurred after US President Donald Trump's "Liberation Day" at the beginning of April, which sparked a global trade conflict.

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