Central banks easing into a thus-far resilient economy

The year gone by has been exceptional in some respects. Global equities touched new highs, and emerging market stocks reached close to their 2021 levels. All this happened despite the US administration’s somewhat unconventional policies, particularly on the trade front, leading to a phenomenal performance of safe-haven gold.

The fact that assets at both ends of the risk spectrum delivered strong returns is remarkable. More recently, European and Japanese bond yields rose. Interestingly, US yields have risen despite the Fed’s rate-cut cycle. Although the long end of the yield curve is less affected by monetary policy decisions (versus the short end), it is still unusual for both to move in opposite directions.

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Monica Defend

Monica Defend

Head of Amundi Investment Institute

The unorthodox policies of the Trump administration and pressures on the Fed mean real yields in the US are likely to be capped, which would diminish the greenback’s safe haven appeal.

Monica Defend, Head of Amundi Investment Institute

Neutral duration with regional divergences

investment

Neutral duration with regional divergences

While the global economy has been reasonably resilient, there are some minor nuances across the main regions. For instance, in the EZ, wage inflation is low, and overall disinflation looks on track. Our expectations of ECB rate cuts in 2026 remain, despite recent hawkish comments from some board members. In Japan, a key question for us is at what yield-level Japanese debt becomes sufficiently attractive, and how much further fiscal easing is likely from the government.

In this environment, we prefer to play across geographies in the search for stability and additional yields. For the latter, we find opportunities in corporate credit and EM bonds (also good from a diversification perspective) that are a source of high-quality yields. 
 



 



 

 

Diversify with small and mid cap in Europe

The global economy has played out reasonably well, and that’s being reflected in market performance amid ample liquidity. What’s not reflected in the markets is policy uncertainty, signs of consumption slowing down, and risks of high valuations. In this environment, our focus remains on fundamentals and staying tilted towards businesses where risk-reward is well balanced. Increasingly, we find such businesses in regions outside the US.

For instance, Europe is making strong commitment to high public spending and to onshoring strategic supply chains. Additionally, in emerging markets, our positive view is reinforced by this year’s outperformance versus the developed world. Overall, we maintain our barbell approach, with a positive stance on quality industrials and defensive sectors.
 


 

Diversify with small and mid cap in Europe

stacking coins

Risk-on: recalibrate, but not retreat

GIV MAY EM

Risk-on: recalibrate, but not retreat

We are seeing mixed macro signals in the US. Job markets are deteriorating, but the pace (of deterioration) is stabilising, the Fed is easing and is conscious of maintaining liquidity, and fiscal policy is supportive. In Europe, consumption is subdued, but inflation is declining. These factors, combined with strong liquidity and benign credit conditions in the markets, somewhat offset (but not completely eliminate) the risks posed by high valuations. Hence, we made some adjustments to our views on risk assets, without changing our medium- term stance. In addition, we maintain that safeguards in the form of gold and hedges on DM equities are essential amid high valuations.

Changes vs previous month

  • Multi-asset: Tactically reduced our stance on Chinese equities to neutral, and turned less cautious on Japanese duration.

  • Fixed income: Upgraded Japanese duration, in an overall active approach.

  • FX: More positive on EM FX in general, upgraded EUR to neutrality, and shifted to a negative view on the USD.

2026-01-20

Global Investment Views - January 2026

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