Shifting near-term narratives

Over the past few weeks, markets have been driven by higher inflation expectations, shifting central bank outlooks and contrasting news flow, all within a matter of days. This resulted in upward pressure on rates and downward pressure on risk assets in the initial part of the conflict. Most equities, including those in the US, Europe and emerging markets, have now returned close to their pre-war levels.

Efforts at ending the war and a fragile ceasefire have supported risk assets, but gains have been repeatedly tempered by a lack of  resolution to the conflict and by the prospect of rates staying higher for longer. Market moves may be summarised by how the narrative has shifted between ceasefire or no ceasefire, risk-on or risk-off, and inflation and growth concerns. 

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Monica Defend

Monica Defend

Head of Amundi Investment Institute

We believe this is an environment where portfolio construction matters more than directional convictions, underscoring the importance of selectivity.

Monica Defend, Head of Amundi Investment Institute

Duration: less directional, more granular

investment

Duration: less directional, more granular

Market pricing of central bank policy decisions has changed from a slight rate cut (at the start of the war) to rate hikes now, particularly for the ECB and the BOE. While we acknowledge the concerns around inflation that have led to this repricing, we do not agree with the degree of this repricing for instance in the case of UK gilts. We also think government bonds in general could see ample supply and that could pressure yields.

Hence, instead of taking bold directional bets, we prefer to be selective across the curves and look for extra yields across corporate credit and EM. The latter has shown resilience in the face of geopolitical stress. It continues to offer strong carry, including in the high-yielding space, but one risk is of an extreme escalation in the Middle East (not our base case).




 



 



 

 

Markets calling for a swift resolution

The massive change in behaviour of equities indicates optimism around a quick resolution of the crisis, but the actual path could be trickier, even if there is a temporary ceasefire. This crisis is not changing our structural convictions around Europe, Japan and EM (ie, Latin America, EM Asia), but we acknowledge the potential for near-term volatility. Additionally, this crisis is keeping us vigilant in exploring areas of resilience (where market moves have been excessive) around these long-term convictions.

Secondly, we now see a greater case for market dispersion rather than a single broad market direction. In Europe, we see second-round beneficiaries from the capex boost in the region and the push towards strategic autonomy. Finally, in the AI complex, markets are now rightly focused on the monetisation of investments, obsolescence risks, and EPS delivery.


 

Markets calling for a swift resolution

stacking coins

Active stance: exploit market dislocations

GIV MAY EM

Active stance: exploit market dislocations

As the crisis continues to evolve, we are looking ahead with an eye on risks regarding the pass-through of higher raw material costs and supply disruptions to corporate margins or consumer inflation. Long-term inflation expectations have not re-priced in a 2022-like way, suggesting that the shock is more about growth and costs than a structural shift in the inflation regime. On the market front, this allows us to remain active and tactical, particularly in areas where valuations are not better than before, and where fundamentals remain robust. Hence, we have tactically raised our stance on equities. Given the persisting geopolitical and economic risks, we think it’s an opportune time to enhance safeguards and maintain a well-diversified stance. 
 

Changes vs previous month

  • Fixed income: Upgraded US duration to neutrality, turned more positive on the UK, but became cautious on Japanese duration.

  • Multi asset: Positive on equities via the US and Latin America; raised our constructive stance on Italian BTPs; adjustments in FX to include a less constructive view on NOK vs EUR.

  • Emerging markets: Selectively positive on EM equities, and less constructive on Indian bonds.

2026-05-13

Global Investment Views - May 2026

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