Amundi: Markets content with a 'not too cold' economy
At the same time, the asset manager points to rising political tensions, questions over Federal Reserve independence, and renewed global fragmentation as reasons why diversification and portfolio risk safeguards remain essential.
Economic growth that is neither too high nor too low to trigger a recession, combined with a high level of market confidence, may explain the continued rise of risk assets, according to Amundi. In this scenario, moderate GDP growth and disinflation allow central banks to act cautiously, maintaining market liquidity.
Amundi sees potential risks to central bank independence and to U.S. economic policy. Any challenge to the Fed could affect inflation expectations. This supports a focus on diversification outside the U.S. and Europe’s pursuit of strategic autonomy. Currently, U.S. economic momentum is strong, and Eurozone (EZ) growth projections have been revised upward. Amundi:
- EZ growth is slightly above previous expectations but below ECB projections (1.0% vs 1.2% real GDP), mainly driven by France and Spain. Growth is supported by real disposable income, investment stimulated by past interest rate cuts, and the deployment of NGEU funds in peripheral countries. Consumption and labor market dynamics are being closely monitored.
- U.S. CPI has been slightly revised down for the year, from 3.0% to 2.8%. Inflation is expected to remain above the Fed’s 2% target for longer, partly due to fiscal measures and upcoming elections. Shelter inflation, which accounts for about one-third of CPI, is expected to decelerate, pulling down overall inflation. Tariff increases have been only partially passed on to consumers, with businesses absorbing higher costs. Consumption is supported by tax refunds in the first half of the year, and real GDP growth is projected at 2%.
- China’s GDP is expected to slow to 4.4% due to weaker domestic activity (corrections in housing and consumption) and softer external demand. The government is likely to implement targeted stimulus to avoid a hard landing, but large-scale measures are not anticipated.
- Gold prices are supported by geopolitical tensions, rising deficits, and central bank demand. Oil prices face short-term downward pressure due to a supply surplus but could stabilize around $60–70 per barrel later in the year.
In an environment of European disinflation, fiscal support and political dynamics in the U.S., and China stabilizing at a lower growth rate, Amundi keeps the overall risk stance neutral to positive:
- Fixed income: Neutral on duration overall, cautious on the U.S., positive on Europe (including peripheral countries) and the U.K. Corporate credit offers attractive carry, especially EU IG BBB and BB. Selective exposure to emerging markets is considered.
- Equities: Preference for structural themes such as reforms in Japan, fiscal stimulus in Germany, and selective exposure outside sectors with speculative interest. Emerging markets are viewed positively due to strong economic activity and central bank easing.
- Multi-asset: Gold is favored for its stabilizing characteristics, oil is downgraded. A cautiously positive stance is taken on Latin American equities. Overall, a balanced, neutral-to-risk-on position is maintained.