• Since the start of the year, some of the key convictions that we have highlighted in our outlook have been playing out and some trends have accelerated. We are witnessing a regime shift characterised by heightened policy uncertainty and a distinct break in the international order — key themes highlighted at the Davos World Economic Forum and confirmed at the Munich Security Conference. Tariffs remain a key tool for the redesign of the new order. Here, the recent Supreme Court ruling against Trump’s emergency tariffs introduced an additional layer of uncertainty to the policy landscape.

  • All these developments confirm that the overall geoeconomic environment is in transition. President Lagarde’s mention in her speech of the ECB’s new repo facility for central banks outside the euro area signifies how policymakers are thinking about the rising importance of geoeconomics.

  • We are clearly entering a more complex market equilibrium, where policy — including trade policy — geopolitics, and capital allocation are as critical as the economic cycle itself. With growth proving more resilient than initially expected and corporate profitability remaining robust, markets have remained well sustained. However, significant rotations are underway across countries, sectors, and individual stocks as the environment adjusts to the ongoing regime shift.

  • A diversified and flexible approach will likely be the name of the game for investors to deal with these shifts and rotations.

     

    In a fast changing world, it is a good time to reassess our main convictions:

 

  • In 2025, the US economy has proven resilient, powered by AI and technology investment and a material wealth effect.

  • Robust domestic consumption has led us to upgrade our growth forecast for 2025, assuming supportive US fiscal measures such as tax cuts and stronger carry‑over momentum from consumption.

  • However, labour markets could present a tricky puzzle and contribute to a two‑speed economy, a pattern reflected in recent economic data.

  • January’s CPI confirms our views on disinflation and we maintain that inflation will remain between 2.5% and 3% this year. 

  • Over the next few months there may be volatility, but overall headline CPI and core PCE should decelerate.

  • In the Eurozone, positive year‑end growth surprises in countries such as Italy and Spain are creating a stronger carry‑over into 2026 and reflect improving domestic demand momentum.

  • Our conviction in the AI capex cycle remains firm, but markets will increasingly distinguish between winners and losers.

  • Recent weakness in certain technology names reflects the market reassessment of risk and concerns that some software segments and trucking could be adversely affected by AI disruption.

  • Yet, given AI’s potential to drive long‑term productivity gains and boost corporate earnings, we continue to see a pro‑risk backdrop over the medium to long term.

 

US information technology

Source: Amundi Investment Institute, Bloomberg. Data as of 18 February 2026.

 

"The era of controlled disorder is about realising that the world is not de-globalising but becoming multi-polar. Investors would need to navigate the markets through better diversification."

  • We believe we are still in the initial phase of a regime shift, in which the rise of is accelerating a move toward a multipolar world.

 

  • The India–EU deal helps Europe diversify trade and reduce US dependence, though meaningful change will take time while China’s rise is occurring in parallel, affecting geopolitics, supply chains, and technology leadership.

 

  • Commodities provide structural hedges and resilience for portfolios amid these shifts.

 

  • Gold balances geopolitical and public‑debt risks and should benefit from structural demand, while base metals like copper should remain essential for cleantech and the green transition.

 

  • Investors are increasingly uneasy about concentrated US dollar exposure and are starting to reallocate toward European and emerging‑market assets, after high‑uncertainty events such as recent US Supreme Court developments.

 

  • We see the move toward “controlled disorder” as structural rather than cyclical, which is accelerating diversification discussions.

 

  • This dynamic further supports our view of gold as a core long‑term hedge in diversified portfolios.

 

US Dollar vs. Gold

Source: Amundi Investment Institute, Bloomberg. Data as of 20 February 2026. 

 

"Maintaining a global approach in equities, beyond the tech race in the US, will be crucial for generating sustainable returns."

Thinking global: understanding that we are shifting from a phase dominated by liquidity and synchronised policy toward one where balance sheets, industrial policies and capital allocation decisions are setting prices. 

  • We are also observing a transition toward a more fragmented, selective and granular market environment. One such example of granularity is that instead of focusing on the broad AI theme, we believe companies involved in AI-related physical infrastructure and the industrials sector are the ones to favour.

     

  • One such example of granularity is that instead of focusing on the broad AI theme, we believe companies involved in AI-related physical infrastructure and the industrials sector are the ones to favour.

     

Europe defence

Source: Amundi Investment Institute, Bloomberg. Data as of 20 February 2026. 2026 performance as on 2026 February. For other years, annual performance for Stoxx Europe 600 Index and its Aerospace and defence subindices shown in local currency.

 

  • Additionally, the rotation out of US technology names towards other sectors and regions was already visible in Q4 last year and it is continuing in 2026.

     

Global Approach in Equities

Source: Amundi Investment Institute, Bloomberg. All indices provided by MSCI and are in local currency. Data as of 18 February.

 

  • More recently, this year’s AI scare has given the rotation a renewed vigour. The S&P 500 software, Mag 7, Nasdaq 100 and Russell 1000 growth indices have all declined so far, whereas the S&P 500 Equal Weighted and Russell 1000 Value indices rose, year to date (as of 20 Feb). 

     

  • Interestingly, Chinese tech was also slightly positive during this period. From a regional perspective, the Japanese, European and the broader emerging market indices outperformed the leading US and technology indices.

     

  • To conclude, our conviction to explore global equities beyond the US tech sector stays in place — it may have different legs, but we see it as a long-term trend.

 

"The interplay of fiscal policy, monetary policy and geopolitics would affect market behaviour, implying traditional safe-havens may no longer work."

  • We see debasement risks to the US dollar from high debt, large fiscal deficits, and reserve diversification by global central banks.

  • These trends are eroding the dollar’s safe‑haven appeal, though the private sector has been slow to shift away from the currency.

  • If private preference changes, it would create a long‑term headwind; we maintain a structural weak call on the dollar (EUR/USD 1.22 year‑end) with tactical near‑term adjustments.

     

Gold is the new safe haven

Source: Amundi Investment Institute, CPR. Monthly data as of November 2025.

 

  • Japan appears to be entering an era of fiscal expansion, supported by political stability, corporate‑governance reforms, and reflation that are attracting foreign investors.

  • PM Takaichi’s consolidation of power raises the likelihood of pro‑growth measures, including tax cuts to boost real wages, which will affect JGBs and the yen.

  • We now expect Fed rate cuts around June/July and September as inflation clarity improves and the new Fed Chair assumes office.

  • While Kevin Warsh’s past hawkishness on balance‑sheet reduction is debated, we think the bar to shrink the Fed’s balance sheet is high and that the Fed may instead shorten the average maturity of its Treasury holdings.

  • We expect one ECB rate cut in Q3, though timing could change with euro strength, tighter credit, or labour‑market deterioration.

  • Given high risks of financial repression and potential political pressure on central banks, it is crucial to remain tactical on duration.

  • The BOJ targets 1.5–2.0% inflation, but political pressure after Takaichi’s consolidation may slow rate hikes; we raised Japanese duration to neutral for 2026.

 

"Diversification and flexibility in allocation would be key to identifying market rotations across various segments and regions."

  • Europe can no longer rely on the US as it once did, prompting a push for greater strategic autonomy.

  • To achieve independence, Europe must invest more in defence, technology, and supply chains — a message underscored at the Munich Security Conference.

  • Additionally, we continue to believe that emerging markets (EM) should be a key pillar for global investors seeking both diversification and access to strong growth opportunities.

  • In India, which we confirm as a structural allocation in EM, we have marginally raised this year’s growth forecast to 6.8% from 6.6%.

  • We expect the Reserve Bank of India to keep rates on hold for the rest of the year, with risks confined to short‑term volatility rather than a structural reversal.

  • Policy continuity and lower US tariffs support India’s capex cycle and reinforce the China‑plus narrative on manufacturing.

  • The EU–India deal and recent budget measures should boost India’s long‑term growth, so we remain constructive.

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Conclusion

 

We think diversification and flexibility will continue to be key in enhancing portfolio resilience and long-term returns. The macroeconomic environment appears increasingly resilient, but with changing policy transition dynamics and strong market rotations that will continue to affect market behaviour. Given this backdrop, we see a late cycle environment continuing this year and therefore maintain a moderate risk on stance. Within this stance, we expect a rotation towards real economy sectors such as industrials (as outlined in the chart) and dispersion across regions and asset classes.

Secondly, high valuations of risk assets constrain our ability to raise our risk stance. Valuations alone, however, are unlikely to trigger a major correction. Instead, triggers would more likely arise from liquidity tightening or a deterioration in credit conditions.

Rotation towards real economy

Source: Amundi Investment Institute, Bloomberg. Data as of 18 February 2026. Russell Indices and S&P 500 industrial shown above in local currency.

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