Cross Asset Investment Strategy - May 2023

Our key takeaways from IMF’s Spring meetings

Investor sentiment is downbeat, but not overly bearish. With tightening credit conditions, our US growth outlook is lower compared to the IMF’s, while we are more optimistic on China. This supports a cautious stance and a search for opportunities across the emerging world, starting with China. There are some signs of complacency on Europe, while debates were mostly focused on geo-economic fragmentation and the urgency of policy action regarding crisis management and to secure artificial intelligence development.

• Macroeconomic focus: Will real bond yields come back down?
• Emerging markets: Short-term relief for emerging markets
• Macroeconomic snapshot
• Central banks watch: DM CB still focused on inflation, some EM CB ready for rate cuts
• Geopolitics: Russia-Ukraine: lengthy war as likely as ceasefire negotiations
• Policy: US debt: the spectre of default resurfaces
• Scenarios and risks 
• Amundi Institute models: US Financial Conditions Index (FCI)
• Infographic - Markets in charts: Equities & Bonds
• Commodities: Cartel back in power
• Currencies: Rays of sunshine for EURUSD

Not a time to change course

The broader equity markets have digested the March turmoil, but the disruption continues to be evident in the US regional banking sector, which is not showing signs of recovery. Bond markets are starting to assess a higher probability of recession in the United States and the potential that the Fed may start to cut rates later this year, as inflation tensions look to be slowing.

May 2023