Explore opportunities in fixed income as central banks are taking actions
It’s all about confidence and convictions
So far, this year has been characterised by diverging economic growth across different regions, along with a renewed focus on domestic politics and geopolitics. On the growth front, we see a mild economic deceleration in the US, without a recession. While inflation is declining, fiscal policy looks constrained and geopolitical risks are high. We think central banks need to take policy decisions carefully.
With the Fed announcing its first rate cut in mid-September, the temporary divergences among central banks in developed markets are coming to an end. Eventually, central bank policy decisions would depend on the pace of economic growth and inflation.
Global growth is improving but not evenly: the US is experiencing a mild slowdown and economic activity in Europe remains stable. Following a similar trend, we expect disinflation to continue, at a slower pace in the US and relatively faster in the eurozone.
We believe emerging markets, particularly India, will play a crucial role in driving the global economic recovery in 2024 due to their resilience, adaptability and sound policy schemes.
We expect geopolitical risks to rise for the coming months and even years. Factors such as trade protectionism, sanctions, tariffs, export controls and trade wars are likely to intensify. Moreover, the outcome of the US election remains uncertain and could have significant economic and market implications. One thing however is highly probable: the relationship between the US and China, the world’s two largest economies and trading partners, might deteriorate further.
What could these current and next developments mean for investors? Focusing on selectivity and solid convictions in order to build resilient portfolios seems like a wise option. We believe investors may rely on high-quality equities to exploit global growth, on bonds to provide income and mitigate risk if economic growth falters, and on alternative real assets to hedge against inflation and add additional diversification*. Last but not least, we consider energy transition assets to offer attractive opportunities, as we observe a global shift towards sustainable energy sources.
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* Diversification does not assure profit or protect against loss.
Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of 27 September 2024. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management S.A.S. and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results.
Date of first use: 27 September 2024
Doc ID: 3895158
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