What is happening in the market and what are the driving forces?

Markets reacted violently to President Trump’s tariff and Greenland threats—equities plunged and volatility spiked before a relief rally after he backed down—while Japanese government bond yields rose and gold hit record highs as the prime safe-haven amid debt and geopolitical anxiety. Although immediate escalation appears off the table, a persistent regime of geopolitical ruptures and the risk of renewed coercive measures remain, with legal and institutional mechanisms (e.g., US Supreme Court rulings, the EU Anti‑Coercion Instrument) acting as partial checks. Given this backdrop, we recommend a globally diversified stance: broaden equity exposure (notably Europe and Japan small/mid‑caps and select EMs such as Brazil and India), maintain a balanced fixed‑income allocation favoring EU/UK duration and selective Italian BTPs, overweight DM corporate credit (especially EU IG financials) and high‑yielding EM bonds, and keep gold as a strategic portfolio stabilizer.

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Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of 27 January 2026. 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 January 2026

Doc ID: 5156514