Summary
The GIV elaborates on the latest views, convictions and outlook of our Global CIOs, Investment Platforms and the Amundi Investment Institute.
Tariffs and fiscal policy, the moment of truth
Mounting concerns over large US fiscal deficits, along with consumers’ inflation expectations and the escalating conflict in the Middle East, have started moving the markets. The issues around fiscal sustainability were further aggravated by President Trump’s Big Beautiful Bill, the renewed interest in fiscal expansion in Europe (including German borrowing plans), and Japanese debt auctions. Long-end bond yields rose in response, but equities showed some resilience.
Curve steepeners are the way forward
Inflation is easing in developed markets, though tariff effects are still unfolding. Meanwhile, high government debt and spending bills risk pushing yields higher. For instance, the Big Beautiful Bill is feeding concerns over bond vigilantes, particularly at the very long end of the yield curve.
Prioritise valuations and quality
Equities have been resilient so far this year, with Europe outperforming the US, as the full impact of tariff policies has yet to be felt. Corporate forward guidance indicate that the impact of tariffs is still not clear. While some companies with pricing power will be able to raise prices once the impact of tariffs are felt, other will not. This differentiation will be crucial in deciding the impact on margins.
Domestic resilience amid global volatility
The long-term (but non-linear) shift away from the dollar and robust EM-DM growth differential paint a constructive picture for emerging market assets. However, at the moment, the uncertainty surrounding President Trump’s next policy moves and their impact on trade negotiations and foreign policy is high – whether relating to conflict in the middle east, and trade with countries such as China, India.
Stay risk-on, disciplined through hedges
Macro conditions, liquidity and growth are reasonably supportive of risk assets. Corporate earnings prospects are also decent, but H2 would test whether companies are able to pass on the higher costs to consumers. This, coupled with high valuations in risk assets and geopolitical uncertainties, could lead to some consolidation but not an outright-sustained recapitulation. We maintain our positive view on risk assets, and believe investors should consider reinforcing hedges.
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