The GIV elaborates on the latest views, convictions and outlook of our Global CIOs, Investment Platforms and the Amundi Investment Institute.
A summer of calm on surface, turbulent currents beneath
US equities touched new highs in August and European markets traded close to their March levels, while corporate credit spreads compressed over the summer. Sentiment was led by expectations for AI capital expenditure, a strong US earnings season, and a relatively dovish Fed at Jackson Hole. Markets seems to be ignoring the risks around economic activity (e.g., labour markets), political pressure on the Fed, fiscal deficits, and corporate margins.
Curve steepening amid deficit concerns
Higher US inflation expectations in the short term, fiscal spending plans in the US and EU (ie, higher bond supply), and continued monetary easing are the main themes we will focus on in the medium term. Collectively, this has led yields in the US, Europe, the UK, and Japan to rise, particularly on the long end of the curve. Additionally, reforms to the pension system in some countries in Europe would further push long term yields upwards.
Diversify in times of concentration risks
Despite the ongoing geopolitical noise and policy uncertainty, global equity markets continued to climb higher. AI sectors are supporting markets, while hard data is, as yet, showing no signs of impact from tariffs. Corporate earnings were better than expected in the US, but concentration risks are rising. Hence, we favour a continuation of a shift away from the US market towards Europe and Japan.
EM idiosyncratic stories make a comeback
Global emerging markets are displaying a return of country-specific factors – some improvements observed in the economic environment in China (external pressures have abated but domestic demand still weak) and India, whereas politics is coming back in focus in Brazil and Indonesia. However, volatility on the trade front still remains a factor across EM. In countries such as India, internal tax reforms bode well for domestic consumption, which is a mainstay of growth.
Pro-risk stance with a rotation to EM
Over the summer, we did not see any extreme macro data coming out of the US or Europe, leading the markets to stay relatively calm. We did, however, note a deterioration in US labour markets even as higher US tariffs were confirmed. Both these should pressure consumption – we affirm our stance of a decelerating growth in US. Monetary policy, on the other hand, looks likely to be accommodative in the EU as well as US. Hence, we are slightly optimistic on risk assets, including EM, and see a need for safeguards in the form of gold (geopolitical risks, fiscal deterioration) and equity hedges.
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