Effective date: 31/08/2026The European Earth observation program, Copernicus, announced this summer a record average sea surface temperature worldwide, at 21.1°C. Beyond the comfort of vacationers swimming, this temperature poses serious problems, both for animal and plant life and for the climate risks it generates: The UN has already warned that El Niño, the meteorological phenomenon that occurs at regular intervals and interrupts the trade winds that used to carry heat from Latin America to Asia, will be particularly strong this year; this is already resulting in significant variations in precipitation and the formation of cyclones in the Pacific, which fortunately have not yet hit the American coasts. The goal of limiting global warming to 1.5°C has already been exceeded, but the climate events of this summer show the importance of trying to limit the overshoot of this level as much as possible to avoid facing even more extreme situations than those already experienced.
August started off rather well, with hopes of restoring traffic in the Strait of Hormuz. The rest of the month was more turbulent, with renewed tensions between Iran and the United States, new tariffs between the United States and Canada in particular, and intensified Russian bombings on Ukraine while the front appears to be at a standstill. From a macroeconomic perspective, activity remains well oriented in the United States, even though economic surprises are deteriorating, while Europe is in a more uncertain dynamic.
In this context, markets focused on the end of earnings releases and the outlook provided by companies, which remain positive. Ultimately, optimism was mainly limited by the evolution of interest rates and the return of concerns about the level of government debt, as significant electoral deadlines lie ahead (midterms, French presidential elections).
The MSCI EMU rose by nearly 1%, driven by financials and technology stocks: German, Spanish, and Italian financials benefited from the distrust towards France, and the market seems to accept the idea that AI will not necessarily disrupt software companies like SAP in a definitive way.
Over the month, CPR Invest Climate Euro underperformed its benchmark quite significantly. This disappointing performance is explained by the correction of French stocks in the portfolio (SG -11%, Orange -7%), continued exposure to technology stocks focused on semiconductors even though their weight has been reduced, the correction of AstraZeneca (-5%), and the underperformance of idiosyncratic cases such as Ahold or Siemens Energy.
Within the portfolio, we sold Orange in favor of Deutsche Telekom: the relative valuation gap between the two stocks now seems excessive to us, while DT suffered from merger rumors with T-Mobile US and its fundamental qualities remain unchanged. We also sold Kingspan after its strong rebound following its earnings release to return to Saint Gobain: the French company suffers from its nationality, while its fundamentals remain excellent and its international diversification largely protects it from the sluggishness of the French market. We continued to reduce semiconductor stocks such as STM to marginally increase Infineon, and sold Astra after the disappointment of its earnings release, to initiate a position in Fresenius SE. The German group is diversified and does not depend on patent expirations that cause investor distrust. Finally, in the financial sector, we sold Erste Bank to increase our positions in BNP and Eurobank, finding in these two cases earnings growth that is less well valued.
The evolution of the markets in the coming months will obviously depend on the evolution of interest rates and the perception of the risk associated with the debt levels of the world's major economies, but also on upcoming electoral deadlines and the political noise that will surround them.
At the microeconomic level, the question of the profitability of investments associated with artificial intelligence remains unresolved, while the increase in upcoming depreciation will continue to weigh on free cash flows. Finally, within industrial sectors, the uneven performances this summer raise questions about the valuation multiples that investors are willing to grant to companies for which visibility remains excellent but which are no longer accelerating their earnings growth.