Cross Asset Investment Strategy - January 2024

Europe: time for fiscal consolidation

The public finances of Eurozone countries began to improve in 2023 and fiscal consolidation will intensify in most Eurozone countries during 2024. Still, fiscal vulnerability – particularly for the most heavily-indebted countries – will rise over time, leading to a higher probability that public debt will not stabilise. The aim of the new fiscal rules is to ensure the long term sustainability of public finances, but funding for the green transition could suffer.

• Macroeconomic focus: Core services remain pivotal to the disinflationary process
• Emerging markets: China & India
• Macroeconomic snapshot
• Central banks watch: More and more CBs approaching the pivot
• Geopolitics: 2024 a year of bigger downside risks
• Policy: Eurozone: mind public debt divergences
• Scenarios and risks 
• Amundi Investment Institute models: Cross Asset Sentinels Threshold (CAST)
• Infographic - Markets in charts: Equities & Bonds
• Commodities: Modest oil upside still ahead
• Currencies: The fall of the USD and the “early cycle signal”

Bonds and EM stand out in the Santa Rally

Declining inflation pressures and a relatively dovish Fed caused bonds and risk assets to gain in recent weeks. But risks related to speculation are rising, as markets have already priced in lot of gains expected in 2024. We agree that central banks (CB) will pivot in 2024, but believe rate cuts would start from May/June. The reasons behind this moves are also important. In our view, a slowing economy (not just slowing inflation) will push the Fed towards easing, as the bank will be watchful of any upside surprises on inflation.

January 2024