Markets Are Trading on Hope, Not Resolution

Edmond de Rothschild describes current market behavior as “mild euphoria,” where optimism repeatedly returns despite the absence of any durable geopolitical breakthrough. 

• Markets swung violently between fear and relief as traders reacted to every rumor surrounding Iran, the Strait of Hormuz, and possible diplomatic negotiations.
• European equities surprisingly outperformed despite collapsing PMI data, largely because weaker growth increases expectations that the ECB will avoid aggressive tightening.
• The report argues that Europe’s structural weaknesses — high energy dependence, weak tech exposure, and deteriorating competitiveness versus China — remain unresolved beneath the surface optimism.
• Meanwhile, US markets continue to display unusual internal divergence: AI-linked infrastructure and utilities remain strong, while energy, industrials, and consumer sectors show growing cracks.

One of the report’s more revealing observations is that markets are increasingly trading headlines and liquidity expectations rather than actual economic clarity.