Markets content with a 'not too cold' economy

The year began eventfully, with the US using its military strength and economic leverage to achieve President Trump’s foreign policy goals. The Fed receiving subpoenas and military action in Venezuela did not move oil prices and risk assets. But his threats to the sovereignty of a NATO ally sparked temporary volatility, with markets eventually recovering from that scare and US lagging the other regions. Fiscal profligacy and inflation concerns in Japan pushed bond yields up.

We think economic growth that is neither too hot nor too cold to trigger a recession, along with a high degree of complacency among markets participants, could explain the continued appreciation of risk assets. In this scenario, modest GDP expansion and disinflation is allowing central banks to move cautiously, preserving market liquidity.

The path ahead is fraught with risks to the independence of the Fed, and Trump’s domestic policies as well as his stated intention to shake-up traditional alliances. Any challenge to the Fed could result in de-anchoring of inflation expectations (not our base case but risks are rising). All this favours our views of diversification out of US assets, and for Europe to pursue its strategic autonomy. 

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Monica Defend

Monica Defend

Head of Amundi Investment Institute

We expect US GDP to expand this year at below-potential level of 2%, after accounting for fiscal support.

Monica Defend, Head of Amundi Investment Institute

Inflation: the key to the ECB’s policy puzzle

investment

Inflation: the key to the ECB’s policy puzzle

Market pricing with respect to ECB rate cuts is asymmetrical, implying they do not expect a rate cut. However, we think the disinflation trajectory will be maintained in the eurozone (EZ), with price pressures undershooting the ECB’s 2% target. As a result, for us, the probability of interest rate reductions is much higher than the probability of a hike. We are also monitoring how the more dovish voices in the ECB could gain prominence and that could further tilt the case towards rate cuts.

In the US, the Fed’s independence, the leadership transition, and labour markets (showing signs of weakening) would keep the market’s attention. We maintain our global focus on yield curves, and look for carry through corporate credit and emerging market bonds in a selective manner.

 



 



 

 

Prefer structural stories over euphoria

US and European equities reached record levels in January despite mixed economic and geopolitical newsflow. Now, valuation dispersion across regions, together with earnings strength, will determine which markets outperform. The reporting season now under way will test EPS growth and, more importantly, capex. In the US, we are concerned about concentration risks, political uncertainty, and misallocation of capital in the AI space. These risks do not justify the current valuations that markets are demanding.

We reaffirm our conviction in diversifying away from the US and AI hyperscalers towards structural stories such as Japan, EM and Europe. Overall, we aim to benefit from volatility when presented with a good balance between valuations and earnings potential.
 


 

Prefer structural stories over euphoria

stacking coins

Strengthen safeguards, finetune risk

GIV MAY EM

Strengthen safeguards, finetune risk

The economic backdrop in the US and Europe is reasonable, but there are indications of slowing US labour markets when valuations are high across many asset classes. Additionally, recent geopolitical newsflow underscores the need for caution, with an overall mild pro-risk stance. Our positive views on equities and credit are supported by a solid profit cycle, robust momentum, and ample liquidity. Specifically, we explore areas of value in EM, and would like to underscore the need to amplify safeguards through gold and reinforce hedges in US and European risk assets.

Changes vs previous month

  • Multi-asset: More positive on gold, cautious on oil; more constructive on EM equities, but slightly less positive on the US and Europe.

  • FX: Upgraded USD to neutral, and turned slightly cautious on the EUR in the near term.

2026-02-11

Global Investment Views - February 2026

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