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Monday 02 May 2022
Global Investment Views, Equity, Fixed income
May 2022 | We are witnessing significant divergences in the economic outlooks and in market performances. From an investment standpoint, while investors should maintain a neutral risk stance, there is room to play these divergences across the different asset classes. While short-term inflation may start to decelerate, the long-term view is increasingly showing that sticky inflation remains high in light of geopolitical risks and the supply chain stress amid Shanghai’s lockdown. The US economy remains solid while the Eurozone is the most exposed to stagflationary risk. We will most likely see at least a short-lived recession in the second half of 2022, triggered by Germany and Italy, while France and Spain might show some resilience.
01 | Amundi Institute Insights: There is an ongoing global repricing of risk under way, signalling a potential inflection point for risky assets. The repricing point in equities should see a tilt toward value and quality, pointing to an outperformance in these sectors.
02 | Fixed Income: Financial conditions have not tightened significantly so far, but they might if central banks are aggressive enough to curb inflation. A watchful, bottom-up stance on credit is should prepare investors for future discrimination.
03 | Equity: Pricing power, business model resilience and balance sheet strength is key. Pricing power can arise from brands, intellectual property and other forms of product differentiation. The risk remains around valuations and, in this respect, a relative value approach is key.
Unless otherwise stated, all information contained in this document is from Amundi Asset Management US (Amundi US) and is as of May 02, 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.
Europe is the area most exposed to the war – in particular, through the effects of higher energy prices, supply chain disruptions, and geographic proximity— but the commodity squeeze goes far beyond energy to include agricultural commodities and metals.
We expect market uncertainty to remain high as we face a period of low visibility on geopolitical developments and economic implications.
Inflation is returning after decades of dormancy, and we predict a slowdown in economic momentum as 2022 progresses.
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