Amundi: 2025 Mid-Year Global Outlook
The rewiring of the global economy and financial markets requires caution from forecasters, policymakers and investors. Indeed, the US approach to trade and international relations signals structural changes that will persist beyond the current administration.
Unpredictable policymaking sets an unfavourable backdrop for the economy and markets, but we also see opportunities linked to different asset prices. Despite high uncertainty and a weak growth outlook, major economies and business have proven resilient so far. The global picture remains positive for credit markets and we do not foresee a corporate profit recession.
Vincent Mortier, Group CIO of Amundi, said: 'Government bond markets are rattled by the threat of higher debt and rising inflation fears, keeping volatility high. Investors are likely to demand greater compensation for long-dated bonds, making yields appealing. The name of the game will be diversifying away from the US and into European and emerging market bonds.'
Monica Defend, Head of Amundi Investment Institute, added: 'Despite unpredictable policymaking, business resilience, and new rerouting trends, the expected rate cuts from central banks will create opportunities in global equities. We are focusing on themes such as European defence spending, US deregulation, corporate governance reform in Japan, and the ‘Make in India’ initiative.'
- Uncertainty - Elevated uncertainty surrounding US policymaking and fiscal path will shape the outlook for economies and markets over the next 12 months. Geopolitical risk, high debt levels and constrained fiscal space increase vulnerabilities.
- Divergences - Major economies display resilience but also diverging paths, with the US expected to slow down, Europe to post moderate growth and India to stand out. Differences in growth, inflation, and fiscal trends will drive divergence, notably in monetary policies.
- Mild risk-on allocation - This ‘rewiring’ of the global economy and financial markets will see equity rotation continue towards Europe and Emerging Markets. At the same time, yield curves are likely to steepen as investors demand bigger risk premiums for long-term bonds when short-term bonds benefit from lower policy rates.
- Resilience and diversification – Our stance is mildly pro-risk, with enhanced hedges against inflation and foreign exchange risks. Focusing on long-term themes and selective exposure to real and alternative assets may help investors navigate day-to-day swings and the breakdown of correlations.
