Financial markets/economy

Markets, prepare for uncertainty and growth at the same time

Posted by MoneyController on 07.06.2024

Two managers of an asset management company give an account of a market scenario marked by a growth outlook for the markets, albeit within some volatile conditions.

An optimistic market view

In their analysis - a summary of which has appeared on the ‘Financialounge’ platform - Vincent Mortier, Group Chief Investment Officer, and Matteo Germano, Deputy Group Chief Investment Officer at Amundi, outlined a market view that is broadly optimistic, but not free of uncertainties and possible market swings. The most relevant variables are the trajectories of the major economies (US, China and Europe), as well as inflation and interest rates set by central banks.

The factors of uncertainty

In the first half of this year, the US economy was more dynamic than expected, and both the conditions of the Chinese economy and the outlook for the European economy seem to be improving. Nevertheless, uncertainty factors remain: the possible slowdown of the US economy, the persistence of inflation and thus also of high interest rates, and the consequences of the trade clash between China and the US.

A strategy focusing on solidity, value and not too high capitalisations

Since the permanence of historically high interest rates could put pressure on companies and the bond market, Mortier and Germano look with more interest to investment-grade bonds, because they fear higher risks for securities of companies with less solid economic fundamentals. In a not entirely different vein, Amundi's managers talk about their equity strategy, which involves investing in cyclical and defensive sectors, as well as in ‘value’ stocks and stocks issued by quality companies, while neglecting the growth and higher-capitalisation segment.

Emerging markets and hard currency debt

Returning to bonds, but shifting to emerging markets, Mortier and Germano mention debt in hard currencies (typically, the dollar), as well as opportunities in some South American countries. Nevertheless, the two Amundi managers do not forget to mention that Asia, as in the case of India, could also offer, in their opinion, some investment opportunities.

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