A breather after buoyant markets

The year is drawing to a close with most risk assets in positive territory, and global stocks and metal prices seeing multiple highs. Even the longest US government shutdown in history didn’t curb market enthusiasm. We think markets have been looking through the weakness in the belief that monetary and fiscal policy levers will be available for support, that profitability of AI investments is almost a given, and that corporate earnings will continue to exceed expectations, following a strong results season in the US, somewhat less so in Europe. The tariffs’ impact on consumption is also largely being ignored.

However, recent concerns over artificial intelligence-led euphoria in the US affirm our stance. We maintain our view that AI capex is boosting the US economy, but is not leading to job creation. Furthermore, while monetary and fiscal support may stabilise the economy, risks in the form of fiscal dominance and financial repression persist. 

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Monica Defend

Monica Defend

Head of Amundi Investment Institute

In an environment of high valuations and scrutiny of AI-investments, we are particularly interested in seeing an improvement in productivity and earnings.

Monica Defend, Head of Amundi Investment Institute

Agile duration: evolving inflation, policy

investment

Agile duration: evolving inflation, policy

Economic growth in Europe is being affected by a cautious consumer, even as we expect disinflation to continue. Headline inflation in the EZ is likely to be below the ECB target by the year-end. Both these should lead the ECB to reduce policy rates. In the US, fiscal impulse amid US mid-term elections next year could put some pressure on the markets there.

The fiscal side is also in focus in the UK as the government tries to plug the gap between its revenues and expenses. Any fiscal tightening would affect growth expectations. Our steepening bias remains across the developed world except in Japan. Overall, we look for opportunities across yield curves, in DM, as well as EM in the search for higher income.

 



 

 

Valuations favour a global approach

Equities have delivered strong returns this year to-date mainly due to both positive sentiment around AI and robust corporate earnings, despite mixed signals on economic activity in the US and Europe. Now, the primary question for us is how much of the good news is priced into valuations. Elevated levels increase the potential for a reversal if revenues or margins disappoint. Thus, any volatility before year end or next year beginning may present opportunities in quality businesses that benefit from structural growth drivers.

We see such businesses for instance in Europe, the UK and Japan and the emerging markets. European fiscal and monetary policy and Japanese corporate reforms, together with a focus on attractive valuation multiples in the UK and small cap, remain important themes for us.

 


 

Valuations favour a global approach

stacking coins

Adopt a more balanced stance on risk

GIV MAY EM

Adopt a more balanced stance on risk

In this current phase of a late-cycle economy, we are witnessing nuanced backdrops across different regions, even as global competition between the US and China continues. For instance, in Europe, economic growth will likely be decent but below potential, US consumption stays fine for now, but a softening labour market means this cannot be sustained. Thus, we are adapting our allocation stance to these nuances, and are looking for value across asset classes. In doing so, we keep a diversified stance towards regions where earnings, valuations and macro environment provide a good risk-reward. Thus, we stay risk- on, with mild adjustments, safeguards, and a positive view on gold.

Changes vs previous month

  • Fixed income: Tactically, we turned less positive on UK duration, downgraded US duration, but upgraded EU duration.

  • Multi asset: We downgraded US equities, and upgraded European stocks. We moved neutral on EM bonds from a tactical perspective after spread tightening.
     

2025-12-19

Global Investment Views - December 2025

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