Global Investment Views

A relief rally, excess optimism overdone

We believe the Fed would keep rates in restrictive territory in the near term. This, coupled with concerns over earnings, allows us to stay cautious on risk assets but with select opportunities in US equities, businesses with strong balance sheets, and quality, value and dividend oriented stocks. In credit, some US IG and EM debt appear attractive. However, investors should include protection in portfolios in the form of USTs on which we are more positive now. This approach should be complemented with an overall well-diversified stance that includes commodities.

Amundi Global Investment Views
Global Investment Views - December 2022

Thematic Macro Policy

When fiscal policy puts the European institutions under pressure

After several months of informal negotiations, the European Commission proposed on 9 November a reform of the Stability and Growth Pact (SGP) to be debated. Only the broad outlines of the reform have been presented. The Commission has deliberately left the most politically sensitive details open. The reform of the fiscal rules must thus be adopted next year.

When fiscal policy puts the European institutions under pressure
When fiscal policy puts the European institutions...

This Month’s Topic

Defensive asset allocation extends into 2023, with a gradual increase in risk exposure later in the year

The economic backdrop foreseen for the next 12 months suggests that the ongoing correction will continue through the first half of 2023, featuring a profits recession and still elevated (albeit moderating) inflation. In H2 some of the headwinds should abate (with lower price pressures and the Fed on hold), supporting a gradual shift from the current defensive stance (with its tilt towards gold, investment grade credit and, marginally, government bonds) to increased risk exposure (mainly via DM equity and high-quality credit).

Defensive asset allocation extends into 2023, with a gradual increase in risk exposure later in the year
Defensive asset allocation extends into...

Thematics

European fixed income: the difficult equation if the energy crisis persists

Beyond the impact of domestic economic variables, euro rates are determined by the energy crisis and political monetary choices. The combination of a new regime of higher energy prices and persistent expansionary fiscal policy could lead to a debt supply shock and persistent inflationary pressures.

European fixed income: the difficult equation if the energy crisis persists
European fixed income: the difficult equation...

Recent developments do not change our expectations for the Russia-Ukraine war

The war in Ukraine will continue to dictate Europe’s prospects in 2023. It will shape local and EU politics, energy security, industrial policy, and international relations. In this article, we outline our expectations for the next phase of the war and offer an optimistic prospect for peace negotiations to lead to a cessation of hostilities in the second half of the year.

Recent developments do not change our expectations for the Russia-Ukraine war
Recent developments do not change our expectations...

China housing policy: better late than never

The latest support measures the Chinese governments announced on housing have sought to re-establish lifelines for struggling developers, clarifying that credit forbearance would not be considered as stepping on the red lines. After sharp deleveraging over a year, stabilising the market is now the priority.

China housing policy: better late than never
China housing policy: better late than never

Lula is back and already scoring goals

Lula netted a goal in Egypt at COP27 in the fight against climate change. However, it was an own-goal on the spending front that unsettled the markets and threw doubt on expectations of a prudently populist policy direction. We still believe Lula’s policies will be of a centre-left nature, with the help of the markets, though risks have risen.

Lula is back and already scoring goals
Lula is back and already scoring goals

Market scenarios & risks

December 2022

We maintain the probabilities of our scenarios unchanged. Some of the risk factors we identify may occur in our central scenario, which is probably not yet fully priced-in by markets. Risks remain skewed to the downside in the short term, but it would take a combination of several risk factors to trigger the downside scenario at the 12-18 month horizon. At this horizon, we believe that the downside is counterbalanced by an upside scenario, that of a rapid decline in inflation due to an easing of gas prices, a ceasefire in Ukraine, and/or to the combined tightening of global monetary policies, the impact of which can be underestimated.

Markets-scenarios-risk.jpg
Market Scenarios and Risks - December 2022

Macroeconomic picture

December 2022

Macroeconomic Picture by area and Macro and Market forecast.

Macroeconomic Picture - September 2022
Macroeconomic Picture - December 2022

Authors

RC - Author - DEFEND Monica
Head of Amundi Investment Institute & Chief Strategist
RC - Author - Vincent Mortier
Group Chief Investment Officer
Germano Matteo
Deputy Group Chief Investment Officer