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Thursday 08 September 2022
Global Investment Views, Equity, Fixed income
September 2022 | With the Q2 earnings season still showing positive trends, the buoyant market environment has translated into looser financial conditions, further complicating the task for central banks. Now that the Fed has reasserted its hawkish stance, we are starting to see some further downward movements, which we think may continue. At this point, we see no positive triggers to keep the rally going, while there are rising risks moving into autumn amid a gloomier economic backdrop.
01 | Amundi Institute Insights: Central banks remain committed to fighting inflation. Our expectation points to hitting a terminal rate of about 1.5% at year-end, and a 0.75% hike in September is now on the cards.
02 | Fixed Income: Elevated inflation, aggressive Fed and ECB, and market expectations are driving yields and risk assets. While we are neutral on duration, we are active and tactical in adjusting/upgrading our stance depending on the extent of yield movements.
03 | Equity: The Fed has clearly indicated its resolve to control inflation, but earnings estimates still look too optimistic and will be revised down. We think in this environment investors should maintain a focus on earnings and valuations.
Unless otherwise stated, all information contained in this document is from Amundi Asset Management US (Amundi US) and is as of September 8, 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.
The double bear markets (in equities and long-term bonds) have nearly adjusted to the end of easy money and the ongoing rising inflation. We are shifting focus from fears of inflation to the deceleration of growth. Earnings expectations have room to go down, and the dollar rally could continue.
As we depart an era of low inflation and easy access to capital and enter a period marked by higher inflation, higher commodity prices, and higher interest rates, we believe the market has already begun to rotate out of the narrow cohort of mega-cap growth stocks that have been leading the market. We believe active managers may benefit from this shift as excessive concentration levels in US equities unwind, providing greater market breadth.
Dramatic price action has taken place over the past weeks in equities and bonds, following hot inflation prints, central bank actions and rising concerns over economic growth. Against this still highly volatile backdrop, investors should stay diversified and avoid adding risk as the market repricing, although advanced, is not over yet. This is the time to move towards high-quality areas and resilient business models that can preserve margins.
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