The Fed’s employment mandate taking centre stage

US bond yields have declined over the past couple of months, and gold has touched records levels. Global and US equities have also reached new highs on the back of expectations of continued economic strength in the US, the monetary easing cycle, earnings resilience, and AI-led momentum. We see an inherent contradiction here, but agree with the monetary easing aspect. The contradiction arises from the view that if the Fed implements rate cuts mainly to address a slowing economy, then the effects of a slowing economy should already be evident in weak labour markets, consumption, and eventually in corporate earnings.

Image
Monica Defend

Monica Defend

Head of Amundi Investment Institute

We see one risk on monetary policy: the ECB turns out to be (over) cautious and cuts policy rates by less than what’s needed, sticking to its price stability mandate.

Monica Defend, Head of Amundi Investment Institute

Benefit from income potential in credit

investment

Benefit from income potential in credit

We are witnessing an odd combination of slowing economic growth in the US and some risk assets reaching record levels. In the Eurozone, the impact of US tariffs and German fiscal boost on growth is yet to be seen. Amid all this, the Fed has initiated its rate cut cycle, despite no signs of recession. Even the ECB, which we expect to stay data-dependent, will likely reduce policy rates as we enter the year-end phase.

We think rate cuts by central banks could likely enhance the appeal of income-generation potential in credit markets, but investors should be mindful of valuations and quality. Hence, this is an opportune time for identifying those segments where carry is attractive and fundamentals reasonably strong. 

 



 

 

A pinch of salt on AI-euphoria

US markets, and to some extent global stocks, have been led by positive newsflow around the AI theme, but we believe markets are over-optimistic on the massive capex plans around this theme. The key question is: what if something cheaper (like the ‘DeepSeek moment’) and faster emerges, and how could that affect the return on investment? Additionally, fiscal expansion and central banks cutting rates are adding to that enthusiasm. To us, this presents the biggest vulnerability.

And hence risk management is getting more important. At the same time, we are identifying granular themes such as corporate reforms in Japan, income generation in the UK, and fiscal boost in Europe (beneficial for mid and small-caps). Overall, our focus remains on quality business models and valuations.

 


 

A pinch of salt on AI-euphoria

stacking coins

Emerging markets in a multi-polar world

GIV MAY EM

Emerging markets in a multi-polar world

Although the US’s economic clout remains dominant, EM countries that can adapt and position themselves around new technologies (such as AI in China) and the reshaping of global supply chains (such as India) will be the beneficiaries of this shift towards multipolarity. More recently, for us, the main topic of internal debate has been the dollar weakness and how the Fed’s monetary easing and Trump’s policies and pressure could affect the currency.

From a structural perspective, EM continue to offer opportunities for selection and diversification, relatively delinked from the global cycle. Hence, we remain overall constructive with a keen focus on the Fed, EM country-specific factors, and geopolitical risks.
 

Fine-tune duration amid evolving inflation

US economic activity is likely to slow in the second half of the year due to weak consumption, which is a dominant part of the economy. We also expect some resilience in inflation in the near term. Even in the UK, the Central Bank is grappling with an uptick in price pressures. In Europe, however, the environment is slightly different in the sense that inflation is under control for now. On risk assets, while valuations are high in some segments, we maintain a slightly positive risk stance (without bold calls) led by fundamentals and earnings potential. At the other end, we reiterate the need for hedges on equities and other portfolio diversifiers/stabilisers such as gold.

Our constructive stance on equities is maintained through the US, the UK, and emerging markets. In the US, earnings momentum, a dovish Fed, and technological advances are positive factors for the benchmark markets. But we maintain a well-diversified approach and are positive on mid-caps, which have lagged the broader markets and are mainly focused on the domestic US economy, outside of the large-cap tech sector. Furthermore, we are optimistic on EM equities in general and on China. Monetary easing by the Fed opens up room for EM central banks to boost their domestic growth environment.

Fine-tune duration amid evolving inflation

GIV May Multi asset

Changes vs previous month

  • Equities: In global factors, turned slightly positive on small caps.

  • Fixed income: Upgraded EU investment grade credit.

  • Multi asset: Downgraded UK duration to neutral.

  • FX: Turned cautious on the USD again.

2025-10-20

Global Investment Views - October 2025

|819 KB

The issuer of this document is Amundi Hong Kong Limited. This document is not intended as an offer or solicitation with respect to the purchase or sale of securities, including shares or units of funds. All views expressed and/or reference to companies cannot be construed as a recommendation by Amundi.  Opinions and estimates may be changed without notice.  To the extent permitted by applicable law, rules, codes and guidelines, Amundi and its related entities accept no liability whatsoever whether direct or indirect that may arise from the use of information contained in this document. This document is for distribution solely to persons permitted to receive it and to persons in jurisdictions who may receive it without breaching applicable legal or regulatory requirements. This document and the mentioned website have not been reviewed by the Securities and Futures Commission in Hong Kong (the“SFC”). This document is prepared for information only and does not have any regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this document. Any person considering an investment should seek independent advice on the suitability or otherwise of the particular investment.  Investors should not only base on this document alone to make investment decisions. Investment involves risk. The past performance information of the market, manager and investments and any forecasts on the economy, stock market, bond market or the economic trends of the markets are not indicative of future performance.  Investment returns not denominated in HKD or USD is exposed to exchange rate fluctuations. The value of an investment may go down or up. This document is not intended for citizens or residents of the United States of America or to any «U.S. Person» , as this term is defined in SEC Regulation S under the U.S. Securities Act of 1933.