Controlled Disorder

A spirit of endurance has characterised the market rally of the past year and looks set to persist in 2026. So will some of the asset price paradoxes that are emerging as the global economy transitions to a new innovation-led regime and as geopolitics enters a phase of controlled disorder.

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Monica Defend

Monica Defend

Head of Amundi Investment Institute

The economy is adapting to a new regime of “controlled disorder”. Tech-led transformation, fiscal stimulus and industrial policy are keeping activity alive and leading to the emergence of new winners. Inflation becomes a structural theme that investors must also factor into their allocations.

Monica Defend, Head of Amundi Investment Institute

In the 2026 Outlook, long‑term shifts are forcefully entering the scene when evaluating near‑term dynamics. This is a transition, not a downturn: an innovation-led era driven by AI capital expenditure, defence and industrial policies aimed at strategic autonomy, where the reallocation of capital, growth and risk is taking place. These forces are reshaping power balances and reconfiguring trade, which raises costs and moderates activity, yet without causing the collapse of globalisation.  
 

Forces to keep the cycle turning

Macro/Financial scenarios and probabilities

Resilient growth amid controlled disorder 

 

  • We are in a transition – not a downturn – driven by AI capex, defence and industrial policies that reallocate capital and reshape trade, raising costs and moderating activity without collapsing globalisation.
  • It’s unclear if AI productivity will offset demographic headwinds, although US IT investment is cushioning domestic demand. High public-debt pressures are tempered for now by tax cuts and higher defence and infrastructure spending.
  • Growth is resilient but unlikely to accelerate sharply, while inflation risks are becoming more structural due to reshoring and the energy transition. Concentration and stretched valuations are key risks to manage.

 

Market implications: Strong focus on diversification, mildly positive for risk assets, weaker USD.

Fiscal-led upside/easing geopolitics

 

Factors that could lift sentiment and improve the outlook:

  • Easing geopolitical tensions
  • Tariff relief
  • Higher fiscal-driven investment in the US and Germany
  • Deregulation
  • QE
  • Broader signs of AI-led productivity gains

 

Market implications: Positive for equity and credit, negative for government bonds.

Political/financial shock

 

Factors that could trigger a downturn:

  • Political instability
  • A de-anchoring of inflation expectations
  • Tightening liquidity
  • Credit events
  • Earnings/capex disappointments in a concentrated, expensive market

 

Market implications: Negative for risky assets and long-dated govies; positive for gold, commodities, and linkers.

A diversification moment

For 2026, the cross-asset stance remains moderately pro-risk yet increasingly diversified. The late cycle continues to reward quality and profitability mainly. However, stretched valuations and rising policy and geopolitical risks call for selectivity and hedging.

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Vincent Mortier

Vincent Mortier

Group CIO

Diversification remains the most effective defence in a world of concentrated equity markets and high valuations. Investor portfolios must rebalance across styles, sectors, sizes and regions to mitigate risks and capture opportunities, notably in Emerging Markets and European assets.

Vincent Mortier, Group CIO

Inflation

Search for income and inflation protection: favouring investment-grade credit, private credit and infrastructure.

Profitability

Profitability and leverage will likely drive leadership in 2026. The US is well positioned but be mindful of valuation and concentration risks. EMs will also offer opportunities.

Volatility

Consider currency and commodity exposure: JPY, EUR, gold and selective EM FX.

The European journey continues

"Europe’s journey continues as reforms, defence investment, and industrial policy redefine its investment landscape. We see opportunities emerging in euro credit, infrastructure and strategic autonomy themes that could reshape Europe’s financial ecosystem and help it move from modest growth toward a more self-sustaining long-term trajectory."

 — Philippe D’Orgeval, Deputy Group CIO

Euro IG: outperformance may continue from controlled supply and solid fundamentals

 

Euro Investment Grade

 

Source: Amundi Investment Institute, Bloomberg, IMF. Total Debt as % of GDP includes all financial liabilities of a government, either central plus local governments debt. Data as of November 2025.

Small- and mid-caps to benefit from lower rates

 

Small and mid-caps

 

Source: Amundi Investment Institute, Bloomberg. Data as of 31 October 2025.

Looking ahead, what are the main convictions for 2026?

2026 will be a year of transition as the global economy adjusts to a regime of “controlled disorder”. AI-driven capex, industrial policy shifts, greater business resilience to tariffs and likely monetary easing should sustain activity and extend the cycle further. Investors will have to weigh equity concentration and valuation risks, rising public debt, structural geopolitical frictions, and sticky inflation from reshoring and the energy transition. Global GDP growth is set to moderate at 3% in 2026 but remain resilient.
 

“Controlled disorder”, where governments and businesses seek to maintain trade and investment flows, will redefine opportunities at a global level. Our base case for 2026 is mildly pro-risk, supporting equities and investment grade credit. With significant risk stemming from vulnerabilities and valuation excesses, portfolios should combine growth exposure with hedges — gold, selected currencies (JPY, EUR), and inflation-linked instruments — and a greater but selective allocation to private markets. Private credit and infrastructure are in the spotlight to improve income and inflation resilience, and to benefit from structural themes such as electrification, reshoring, AI and robust demand for private capital, particularly in Europe.
 

Despite the sub-par growth outlook, we do not anticipate an earnings recession, as businesses show resilience. This, coupled with the Fed's anticipated rate cuts, supports a mildly constructive asset allocation with inflation protection. We favour global equities with a focus on valuations and pricing power, along with commodities, gold, and hedges against growth and inflation risks stemming from a world of geopolitical uncertainty. Infrastructure investments can offer stable cash flows. Currency diversification will be crucial amid shifting correlations between the USD, equities, and bonds.

Policy choices will drive markets. US debt is unprecedentedly high, which adds risks to the Fed’s independence at a time when inflation is still above target. This balance of forces should keep US yields range-bound, favouring a tactical duration stance and inflation-protection. In 2026, European bonds remain a key call for global investors, with a focus on peripheral bonds and UK Gilts. In credit, we like euro investment grade, with solid fundamentals and are cautious on US high yield, which is exposed to regional banks and is consumer dependent. We believe the USD will continue to weaken, but the journey will not be linear.
 

Emerging Markets and Europe are areas where short-term opportunities meet long-term themes. The EM rally has room to continue into 2026: a weaker dollar, potential Fed cuts, and the EM growth edge support EM bonds for income and selective EM equities. Europe’s appeal should increase throughout the year as reforms combined with defence and infrastructure spending turn into tangible opportunities, particularly in euro credit and small- and mid-cap equities (with a focus on domestic trends and compelling valuations).

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