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Markets are Shifting Away From Inflation and Towards Growth
Thursday 02 February 2023
Global Investment Views, Equity, Fixed income
Markets are Shifting Away From Inflation and Towards Growth
February 2023| Markets are shifting focus away from inflation towards growth, with a slightly less disruptive economic picture for Europe and a more optimistic view on China. Intra-market rotations also materialized, with cyclical stocks favored over defensive names in Europe and tech stocks in the US supported by expectations of a less aggressive US Federal Reserve. Going forward, four themes should be crucial: (1) inflation/growth balance; (2) central bank actions; (3) dollar weakening; and (4) the corporate earnings trajectory. Any negative growth and earnings surprise could drive markets lower while there are no short-term triggers for upside at current valuation levels.
01 | Amundi Institute Insights: We think headwinds for the eurozone economy persist, but we expect growth and inflation to prove resilient.
02 | Fixed Income: We keep our marginally cautious stance on fixed income duration (core Europe and Japan, neutral US) but are vigilant regarding inflation, monetary policy, and yield movement dynamics.
03 | Equity: The likely negative effects of the rising USD last year on Q1 and Q2 corporate earnings, combined with record levels of profit margins, lead us to be cautious on mega-cap names in the US.
Important Information
Unless otherwise stated, all information contained in this document is from Amundi Asset Management US (Amundi US) and is as of January 31, 2023. 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
03/01/2023
Global Investment Views, Equity, Fixed income
Rally fatigue: dichotomy between markets and economy too wide
The dichotomy between loose financial conditions and tight lending standards for the real economy is striking. Markets remain priced for perfection, despite high uncertainty and divergences on the economic front. Regarding the US, we see deteriorating quarterly dynamics for the second part of the year. For the eurozone, we upgraded our gross domestic product projections for 2023 but our growth expectations remain flat. Inflation is declining slowly, but markets see it falling rapidly. With regard to central banks, we see that the US Federal Reserve is close to the end of tightening, but the European Central Bank is still hawkish. Finally, appetite for emerging markets is returning, but regarding developed markets, caution prevails. Against this fragmented backdrop, we think investors should remain cautious and recognize that uncertainty is high.
12/20/2022
Global Investment Views, Equity, Fixed income
Relief Rally Unlikely to Continue
For markets, this economic backdrop calls for a confirmation of a correction regime at the end of 2022 and in H1 2023, with inflation slowing, but still above normal levels. The correction phase will likely be driven by the profit recession, which we expect to materialize in H1. We believe a more cautious stance in equities would be prudent. For government bonds, slowing economic growth and hints about the change in the size of rate hikes may call for an active duration stance.
12/05/2022
Investment Talks, Fixed income, Equity, Perspectives
Investment Outlook 2023: Some Light for Investors After the Storm
We predict that 2023 will be a two-speed year, with plenty of risks to watch out for. Bonds are back, market valuations are getting more attractive, and a Fed pivot in the first part of the year could trigger interesting entry points. We expect global growth to slow significantly, with several countries across both developed markets and EM suffering stagnation, while others may face a slowdown at best.
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