Crédit Mutuel AM: Asset allocation convictions

November 19, 2025

Asset Allocation

As the year comes to an end, political and geopolitical tensions continue to dominate discussions. Hardly a week passes without new announcements of tariffs on China, Canada, or other nations—often for reasons that are more symbolic than substantial.

Yet, uncertainty has significantly decreased in recent months. U.S. tariffs have stabilized around 17–18%, and markets appear comfortable with this level, suggesting that global trade has not been derailed and that the worst may have been avoided—despite recent threats of a 100% hike targeting China.

While these debates will likely stay in the spotlight in the months ahead, they should not overshadow what truly matters: the global economic outlook is robust. Growth forecasts have been steadily revised upward over the past six months—in the U.S., the Eurozone, and China—and this positive trend is expected to persist through year-end.

Two key factors are driving this positive momentum:

Strong fiscal support in the United States. This year, the U.S. government is expected to spend $6.2 trillion — an 8% increase compared to 2024. Despite an 8% rise in tax revenues and $200 billion in tariffs, the deficit is still expected to widen by roughly $100 billion in 2025. Tax cuts passed earlier this year, along with increased defense spending, will continue to have positive effects in 2026. And this fiscal support isn’t limited to the U.S.: Germany’s major spending plans approved earlier this year are starting to boost the economy, and this positive trend should continue into 2026, despite some delays in implementation. In Japan, we also expect more government support following the election of Sanae Taksishi as Prime Minister.
The scale of AI-related investment—particularly in the U.S.—is remarkable. Hyperscalers are racing to dominate the market, investing amounts that would make any European economy blush: over $440 billion in 2025, with projections exceeding $500 billion in 2026. While questions remain about long-term profitability, from a macroeconomic perspective these investments are currently providing substantial support to growth.

Inflation risks remain broadly contained—even in the U.S., where expectations have held steady. This gives central banks room to maintain an accommodative stance, providing further support to risk assets. That said, we believe market expectations for Fed rate cuts in 2026 may be slightly overestimated.

A quick word on France to conclude: it remains the weak spot in the Eurozone, both economically and politically. Unfortunately, the medium-term outlook offers little reason for optimism, and the spread with Germany will likely struggle to remain below 80 basis points for long.

Overall, we anticipate a favorable environment for continued equity market gains, with a preference for emerging markets, where valuations are more attractive. Credit assets should also benefit from sustained strong demand.