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A strong job market and high inflation do not support any change in the Fed's tightening monetary policy stance. Hence, investors should stay cautious on risk assets, with an emphasis on corporate earnings and stability in markets.
We are witnessing a slowdown in economic growth along with continuing geopolitical tensions. This means US Treasuries present a potential to protect portfolios from economic growth pressures but investors should keep an active stance. There are opportunities in select European markets as well.
Amid an overall vigilant view, we think the focus should be on high-grade credit of companies with strong fundamentals. We like high quality names in US over Europe and are skeptical over the outlook of lower rated debt.
High input costs for companies and weakening consumer demand lead us to stay defensive on equities. Investors should play the relative resilience of US over Europe and here too prefer the less cyclical businesses with capability to deliver dividends.
While short-term challenges remain in countries such as China, long-term consumption potential of the EM world is still intact. We like commodity exporters such as Brazil and debt of EM with strong financial position but overall selection is important.
Markets are not fully accounting for a decline in profits and central banks' monetary policy tightening is further complicating the backdrop for risk assets. As a result, we keep a cautious stance particularly on low quality credit. We think high quality credit of US companies with low debt should do well along with selective EM credit. On the other hand, economic growth concerns allow us to stay neutral but agile on US government bonds. At the same time, investors should be aware of liquidity and financial stability risks. This warrants a diversified stance that provides inflation-adjusted returns, but with a tilt towards quality assets across the board.
GLOSSARY
Fed pivot is not around the corner
Bonds remain in limelight
Quality is the way to go in credit
Profits under pressure
Selection of the heterogeneous Emerging Markets
Sail ahead but be prepared
1. Inflation: Increase of the general level of prices for goods and services, decreasing purchasing power as a result.
2. US Treasuries: Referring to government bonds issued by the United States.
3. Cyclical Values: Referring to stocks whose performance follows the overall economy, rising when it grows and dropping during declines (e.g. luxury items, airlines, hospitality etc).
IMPORTANT INFORMATION
Diversification does not guarantee a profit or protect against a loss. Unless otherwise stated, all information contained in this document is from Amundi Asset Management and is as of 25 November 2022. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management, and are subject to change at any time based on market and other conditions and there can be no assurances that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, as securities recommendations, or as an indication of trading on behalf of any Amundi Asset Management product. There is no guarantee that market forecasts discussed will be realised or that these trends will continue. Investments involve certain risks, including political and currency risks. Investment return and principal value may go down as well as up and could result in the loss of all capital invested. This material does not constitute an offer to buy or a solicitation to sell any units of any investment fund or any services.
Amundi Asset Management - Amundi AM, French joint stock company (Société par actions simplifée) with a capital stock of 1 143 615 555. Portfolio management company approved by the French Financial Markets Authority (Autorité des marchés Financiers - AMF) under no.GP 04000036 Head office: 91-93, boulevard Pasteur, 75015 Paris - France.
This document is issued by Amundi Singapore Limited (Company Registration No 198900774 E) and is for information only. The information contained in this document neither constitutes an offer to buy nor a solicitation to sell a product and shall not be considered as an investment advice. While reasonable care has been taken to ensure that the information contained herein is not untrue or misleading at the time of publication, Amundi Singapore Limited makes no representation as to its accuracy or completeness. Opinions expressed in this report are subject to change without notice. We do not accept liability whatsoever whether direct or indirect that may arise from the use of information contained in this document. Amundi Singapore Limited, its associates, directors, connected parties and/or employees may from time to time have interests and or underwriting commitments in the securities mentioned in this document. Past performance and any forecasts made are not necessarily indicative of the future results. All investments carry certain elements of risk and accordingly the amount received from such investments may be less than the original invested amount. 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. The information contained in this document is deemed accurate as at 25 November 2022.
Date of First Use: 25 November 2022.
Major themes to watch
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This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.
This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.
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1. Inflation:
2. US Treasuries:
3. Cyclical Values:
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