Explore the broadening of the rally with Europe

Equities and commodities such as gold touched historical highs in May. The stocks rally broadened to Europe, the UK and China after the Fed paved the way for a dovish environment. In line US inflation also boosted sentiment. On the other hand, corporate earnings proved better than expected in the US and Europe...

Image
Vincent Mortier

Vincent Mortier

Group CIO

Expectations of monetary easing by central banks may support areas that show earnings resilience and are attractively priced.

Vincent Mortier, Group CIO

Regional divergences call for rotation

investment

Regional divergences call for rotation

The economic backdrop in countries such as the US has proved to be better than expected so far, which has helped to lift market sentiment. For the second half of the year, we expect a deceleration in the US economy and a small risk of an inflation reacceleration. We see rotation opportunities in developed markets equities, particularly in areas that have lagged behind in this year’s rally.

Decelerating inflation paints a positive picture for bonds

Soft data in the form of consumer surveys are pointing to weakness ahead in the US, along with cooling inflation and labour markets. The last two are the main factors the Fed, currently in pause, will need to consider in terms of judging when to start cutting rates. Across the Atlantic, the story is similar for the ECB and the Bank of England, but the difference (with the Fed) lies in the degree of expected monetary easing. 

Decelerating inflation paints a positive picture for bonds

stacking coins

Use earnings resilience to play the shift in equities

a woman looking at the stock exchange market

Use earnings resilience to play the shift in equities

Markets are still characterised by anomalies, even though we are observing some underlying shifts in favour of segments that have lagged behind in this year’s rally, such as value and small caps. In order to assess whether these shifts will continue, we assess the overall economic backdrop, the earnings strength of companies and corporate commentaries especially related to inflation, costs, artificial intelligence (AI) etc. 

Hot Takes From Us

What’s your view on the US economy this year? 
How will central banks’ policies affect the USD?  
How are corporate earnings turning out this season?

This document is not intended as an offer or solicitation with respect to the purchase or sale of securities, including shares or units of funds. All views expressed and/or reference to companies cannot be construed as a recommendation by Amundi.  Opinions and estimates may be changed without notice.  To the extent permitted by applicable law, rules, codes and guidelines, Amundi and its related entities accept no liability whatsoever whether direct or indirect that may arise from the use of information contained in this document.

This document is for distribution solely to persons permitted to receive it and to persons in jurisdictions who may receive it without breaching applicable legal or regulatory requirements. This document has not been reviewed by the Securities and Futures Commission in Hong Kong.

This document is prepared for information only and does not have any regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this document. Any person considering an investment should seek independent advice on the suitability or otherwise of the particular investment.  Investors should not only base on this document alone to make investment decisions.

Investment involves risk. The past performance information of the market, manager and investments and any forecasts on the economy, stock market, bond market or the economic trends of the markets are not indicative of future performance.  Investment returns not denominated in HKD or USD is exposed to exchange rate fluctuations. The value of an investment may go down or up.

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.