Thursday 16 March 2023
Investment Talks
March 2023 | In our view, the European bank sell-off is mainly driven by profit-taking and a reassessment of recessionary risks, which is not supportive for the profitability of the sector. In the case of a further escalation in this crisis, we expect the majority of the counterparty exposures to be collateralized, so we do not expect material losses from a potential resolution or wind down. The sector is well-capitalized and liquid and we don't see any other specific instances that pose large risks to other banking stocks. It will be important to monitor liquidity and deposit flows for the sector over the coming periods.
01 | Credit Suisse's share price plunged further this week and the cost of insuring the bank's bonds against a default has reached distressed levels. Yet the European banking sector is solid, with measures having been put in place after the great financial crisis to limit contagion risk.
02 | The failure of Silicon Valley Bank and other regional banks in the US, which led to the turbulence now affecting Credit Suisse, can largely be attributed to the sharp increase in rates and the inversion of the yield curve.
03 | We reiterate the need to keep a cautious stance on risk assets at this stage as the vulnerabilities built up in this fast-hiking cycle are starting to materialize. Government bonds have demonstrated their role as a diversifier in this crisis.
Important Information
Unless otherwise stated, all information contained in this document is from Amundi Asset Management US (Amundi US) and is as of March 16, 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.
In 2022, Amundi did more than resist in a difficult context and continued to develop, thanks to the growth drivers of its Ambitions 2025 plan
In the year since the Ukraine War began, the geopolitical landscape has changed significantly. NATO has re-established itself as the West's foremost defense organization and is expanding as a direct consequence of the conflict, as shown by Sweden and Finland's recent efforts to join. Germany, now one of the biggest defense spenders in Europe, is no longer sitting on the sidelines when it comes to military decision-making. All across the continent, defense spending as a share of GDP has increased significantly. Meanwhile, a surprising number of countries are refusing to condemn Russia and are enjoying new importance on the global stage. Nuclear power and new energy sources are also hot topics.
