Amundi has a mildly positive outlook on equities and favours duration as the French asset manager said that the likelihood of further gains will be limited.
“The economic context supports earnings and risky assets, but most of the upside potential is already priced in and finding clear catalysts for further gains will be challenging,” said Vincent Mortier, group CIO of Amundi, in the French investment manager’s second half outlook.
“To navigate the uncertain transition into the next phase of the cycle, we favour high-quality equities, a positive duration stance and commodities to hedge against inflation risk.”
Europe’s largest asset manager reckons that the likelihood is that the US Federal Reserve will begin cutting rates by September as inflation begins to come down and it will avoid a slowdown.
Amundi said that it expects equities will remain range bound (-5%/+5%) during the second half, although it singled out opportunities in European small caps and defensives and cyclicals among other areas.
In fixed income, Amundi urged investors to take advantage of the historical opportunities in the asset class and prepare for structural steepening. It singled out government bonds and investment grade credit in particular, while it also noted that emerging market bonds will benefit from Fed easing.
In terms of alternatives, it singled out hedge funds, while it also noted that commodities, especially metals, will be increasingly exposed to geopolitical trends and structural shifts such as the energy transition.
Regarding currencies, it expects the dollar to weaken as the Fed pivots, while in emerging markets, it favours ultra-high yielding currencies such as those of Brazil, India, Indonesia, Mexico and Peru.
