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Amundi Investment Talks 14
Amundi Institute, Investment Talks
Thursday, May 7th 11:00am (CET)
Are we on the road to recovery yet?
We at Amundi believe the road to recovery will be a marathon, not a sprint.
We are delighted to launch the new Investment Talks series, the Road to Recovery.
Over the next few weeks, Amundi experts will shed light on what sort of economic recovery we could expect to see, the challenges and the big risks that still exist in the global economy.
Speaker: Didier Borowski takes a look at the fiscal response from Central banks, and how their measures may support a recovery in the global economy.
Dear All,
Thank you for joining the Amundi Investment Talks Call yesterday.
The key takeaways are outlined below.
Key Takeaways
Road to recovery will take time
We are in the middle of a deep but young economic recession mechanically triggered by the global lockdown which has generated a sudden stop in activity in developed and emerging markets. There has been a profound disruption in global demand, supply chains and labour markets. The expected recovery in the second half of this year and the next may not offset the contraction which was seen in the first half. Uncertainty remains high and this affects demand, consumption and investment. However, the good news is that the lockdown measures are gradually being lifted in Europe and in the US as the newsflow regarding the pandemic is improving.
Central Banks will remain 'central'
CBs are lenders of last resort but their role is also to maintain macro-financial stability. In the current environment of massive fiscal and monetary stimulus, CB balance sheets and government balance sheets have been intertwined. CBs need to buy government bonds to keep yields low and to avoid the transformation of this liquidity crisis into a full-blown credit crunch and a solvency crisis. The future of this policy mix is still unknown but an important consideration is that the impact of the current shock is disinflationary in the short term. Another key question is CB independence. In Europe, while the recent German court ruling on ECB’s previous QE is symbolically important, investors should understand that the ECB operates under the jurisdiction of the European Court of Justice. Therefore, in the worst case, the ECB may demonstrate that it has respected the EU treaty and the proportionality rule. Eventually, any tension will be resolved in the spirit of European integration and ECB policy doesn’t appear to be at risk in the short term.
Liquidity must remain a priority for investors
The recent rebound in equities was not in line with macro-economic data and we believe current levels do not call for adding risk in portfolios; instead, investors should remain cautious. We believe selective stock picking is crucial to identify resilient business models that can withstand the highly volatile and uncertain environment. Furthermore, we believe that opportunities may also exist in credit, particularly in investment-grade as there has been strong demand in the primary market, but focus on credit quality and liquidity is paramount. Search for yield continues in European periphery bonds, given that ECB support is likely to avoid deep fragmentation in the markets.
IMPORTANT INFORMATION
This material is for Professional Clients only and is issued by Amundi Asset Management. Unless otherwise stated, all views expressed are those of Amundi Asset Management as at the date of publication. These views are subject to change at any time based on market and other conditions and there can be no assurances that countries, markets or sectors will perform as expected. Past performance does not guarantee and is not indicative of future results. Investments involve certain risks, including political and currency risks. Investment return and principal value may go down as well as up and could result in the loss of all capital invested. This material does not constitute investment advice or an offering of any investment fund shares or units and does not take account of the investment objectives or needs or suitability requirements of any specific investor.
