Life Above Zero: Investors' Journey at a Time of Rising Rates

Friday 01 July 2022

Investment Talks


Life Above Zero: Investors' Journey at a Time of Rising Rates

July 2022 | We expect economic momentum to slow in the second half of 2022 as inflation acts as a regressive tax on consumers with huge divergences across regions, countries and sectors. However, we do not foresee a global recession. Inflation might be close to peaking in most areas, but we expect the inflationary environment to persist in 2022 and 2023.

01 |  The H2 economic outlook features divergences in growth, inflation and policy mix across regions. Stagflation risk will likely be a common feature across developed markets.

02 | Inflation may be close to a peak, but should stay high due to deglobalization, supply bottlenecks, high commodity prices and upbeat US wage growth. A psychological dimension is also kicking in.

03 | Fiscal stimulus is mostly behind us, with some country specific room available, particularly in Europe and China. In the United States, fiscal space is non existent ahead of mid term elections.

Life Above Zero: Investors' Journey - Time of Rising Rates

Important Information

Unless otherwise stated, all information contained in this document is from Amundi Asset Management US (Amundi US) and is as of July 01, 2022. 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 US 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. Amundi Asset Management US is the US business of the Amundi Asset Management group of companies.

Other news

UK Crisis
09/28/2022 Investment Talks

UK Market Turmoil Points Towards Further Volatility in Global Currencies

Investors’ focus is shifting from the poor growth/inflation mix in the UK to the extremely negative external balance picture. On September 23, the government announced an additional 0.5% of GDP in unfunded tax cuts. The reaction of UK assets recalled actions we used to see only in emerging markets. The market is giving a strong signal that it is no longer willing to provide capital to fund the UK’s external deficit position. The correlation between interest rates and the currency signals that the market is questioning the credibility of UK policymakers’ actions.

08/16/2022 Investment Talks

Mind the Lag: Recession Fears Flare Too Fast

Investors expect central banks will tame inflation whatever the cost, even triggering recession if necessary. This may indeed be policymakers' approach in the short term as they seek to re-establish their credibility, but investors risk overestimating central bankers' ultimate willingness to hurt growth..  We predict that inflation will therefore be higher than many expect over the next couple of years, with important implications for asset prices. 

May Investment Talks FOMC meeting
05/05/2022 Investment Talks

May FOMC Meeting: 50bp Interest Rate Hike is Bullish for Markets

Fed Chair Powell stated the need for a 50bp rate hike at the next couple of meetings. Powell's comments on rate hikes suggest the Fed remains comfortable with market pricing at this point, and will be even more data-dependent going forward. While there was little reaction in the financial markets following the release of the FOMC statement, after the press conference, which was not as hawkish as market expectations, there was a strong rally in risk assets.