The current phase of “controlled disorder”, further exacerbated by the conflict in the Middle East centred on Iran, has heightened market volatility and uncertainty.
While the precise macroeconomic consequences remain unclear, these events are likely to reinforce the demand for predictability as investors seek instruments that enhance portfolio resilience. Fixed income provides regular income streams which can be well diversified across geographies and sectors to cushion the effects of low probability, high impact events. Furthermore, active portfolios managed by teams with demonstrated skill in navigating uncertainty have a potential to harness volatility to investors’ advantage.
Active, flexible fixed income strategies should therefore be central to portfolio positioning, thanks to their ability to adjust duration, move up in credit quality and uncover pockets of value while helping to mitigate risk.
Lastly, as all-in yields remain near 15-year highs, fixed income currently offers compelling future return potential.
A stagflationary impulse - weaker growth alongside higher inflation, driven by a sustained period of elevated oil and gas prices - is now perceived as a material risk.
The impact of higher energy prices will be uneven across regions: the US economy is expected to remain relatively resilient, widening its growth premium versus other regions, while Europe is likely to be more vulnerable to an oil-driven inflation impulse, although the shock may accelerate policy and investment trends towards energy autonomy and the green transition.
For emerging markets, the situation will be heterogeneous: rising producer prices in large economies such as China could add to global inflationary pressures, while oil-producing economies and regions with favourable fiscal positions, for example parts of Latin America, may prove relatively resilient.
This creates a policy dilemma for central banks: raising rates risks further slowing growth, but keeping rates too low could allow inflationary pressures to persist.
Looking at developed markets, we expect the Federal Reserve to retain an easing bias but to delay substantive rate cuts until later than initially expected (likely postponed to September and early 2027), while the European Central Bank is likely to remain on hold in the near term. In our central scenario we do not expect rate cuts this year, nor do we expect hikes, as the ECB navigates the trade-off between weak growth and elevated inflation.
FED | Easing bias retained but rate cuts* postponed to September and early 2027. The easing bias is confirmed by an exacerbation of economic bifurcation (more stress on low earners compared to high earners) and subdued labour market. The mild inflation spike will be consistent with the Fed continuing to ease policy rates. | ||
ECB | On hold this year. We do not project any rate cut this year in our central scenario (from a cut earlier). However, the ECB should not hike either, trapped in a policy dilemma combining weak growth and high inflation. | ||
BoE | Cuts postponed. We have postponed our rate cut expectations to June and September as the BoE is likely to ignore the mild upward pressure on inflation. | ||
BoJ | No change. Tightening to continue with a higher sensitivity towards the yen. In the base case, we continue to see the BoJ hiking once by 25bps over the summer. A larger weakening in the yen could trigger a larger hike. | ||
| PBoC | No change to our policy assessment of two cuts starting in May**. | ||
| RBI | No change, we expect the RBI to stay on hold this year. | ||
Source: Amundi Investment Institute, as of 10 March 2026. *25 bps each, **total 20 bps. The chart presents the Amundi Investment Institute’s reference projections based on information available as of 10 March 2026, incorporates tariffs implemented up to that date in 2026, and does not consider major disruption from the Iran conflict. The oil shock scenario is based on the assumptions in the Amundi Oil Shock Scenario slide. The scenario isolates the oil and gas shock transmission channel and does not fully capture broader strategic evolution of the conflict beyond energy disruption. These figures are for illustrative purposes and are subject to revision, in case of protracted oil shocks.
Solutions that enhance portfolio stability are becoming increasingly appealing in a volatile market. We believe an active approach to fixed income could represent an optimal solution in the current environment, as uncertainty is likely to persist and significant regional and idiosyncratic divergences are expected to continue to unfold.
We advocate high-quality strategies that adopt a disciplined yet flexible approach, dynamically adjusting duration and positions to navigate rapid shifts in inflation and policy expectations, while also adding exposures when dislocations present attractive risk-adjusted return opportunities.
At the same time we emphasise diversification* across credit quality, sectors, geographies and currencies to mitigate idiosyncratic and commodity-driven risks.
Amundi is one of the industry leaders in fixed income, with AuM of over €1 trillion (as of 31 December 2025).
Over the past 20 years we have developed a comprehensive range of fixed income investment products, encompassing fundamental, rule based and active approaches to buy and maintain strategies.
The team’s strong skill set and broad expertise seek to identify the best opportunities while continually evolving the ways in which potential returns are sourced.
At Amundi, we are well placed to help you reinforce your portfolio and benefit from the opportunities presented by these significant macroeconomic changes.
The current geopolitical shock strengthens the case for a strategic allocation to fixed income. Its capacity to deliver regular income and to reduce portfolio volatility — especially when managed actively and combined with robust diversification* — makes it an attractive solution for investors relying on experienced managers in an environment of heightened uncertainty.
Article published on 20 March 2026
*Diversification does not guarantee a profit or protect against a loss.
Marketing material for professional investors only
Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of 20 March 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: 20 March 2026
Doc ID: 5323084
