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LONDON — Amundi, Europe’s largest fund manager, said on Thursday it was underweight global equity markets, favored the yen and expected the US dollar to weaken longer term. as interest rates approach a peak and growth prospects deteriorate.
In its global outlook for 2023, Amundi said one of its main themes for next year was that “bonds are back”, adding that it favored government bonds and investment grade debt.
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Decades-high inflation and aggressive central bank interest rate hikes have rattled global markets this year.
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US and German ten-year bond yields have risen more than 200 basis points each this year, the S&P 500 stock index has fallen nearly 16% and the US dollar, supported by Federal Reserve tightening, has climbed 11%.
Vincent Mortier, chief investment officer of Amundi Group, which manages 1.9 trillion euros ($1.98 trillion) in assets, told Reuters the company remained cautious on the stock market outlook but hoped to pull back the ‘next year.
“It’s hard to be very positive in the stock market at current prices,” Mortier said.
Mortier said Amundi was constructive on China, where overall the company had a neutral to positive stance on Chinese equities and credit, citing factors such as hope for a relaxation of tough COVID-19.
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In Europe, where Amundi anticipates a lasting energy crisis in its central scenario, the asset manager saw a “high probability” that the European Union would issue more common debt.
The EU is already issuing joint bonds for a post-COVID recovery fund of up to 800 billion euros ($879 billion). The war in Ukraine has revived talks about increasing emissions to fund defense and energy security needs.
DOLLAR PEAK
Amundi said that while the US dollar could strengthen further in the short term, it was likely to weaken in the longer term with a peak in US interest rates in sight.
A “substantial majority” of policymakers at the Fed’s meeting earlier this month agreed that it would “probably soon be appropriate” to slow the pace of rate hikes, according to minutes released Wednesday.
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In a scenario of moderating price pressures and peaking rates, Amundi said it expects the dollar to weaken 4.7% on a trade-weighted basis next year.
“In the short term, we think the US dollar can strengthen a bit and the euro will go back below parity,” Mortier said. “But in the medium to long term, we think the dollar will weaken and the euro will come back towards around $1.06.”
Mortier added that Amundi was overweight the Japanese yen and Swiss franc last week, meaning it expected the two currencies to strengthen.
He said the company was underweight UK government bonds, known as gilts, and the pound, but added it was not “forever”.
While UK markets have stabilized after a rout triggered by a so-called mini-budget in September, sentiment remains fragile, especially as the economy faces a long recession. ($1 = 0.9590 euros) (Reporting by Dhara Ranasinghe; editing by Yoruk Bahceli and Tomasz Janowski)
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LONDON — Amundi, Europe’s largest fund manager, said on Thursday it was underweight global equity markets, favored the yen and expected the US dollar to weaken longer term. as interest rates approach a peak and growth prospects deteriorate.
In its global outlook for 2023, Amundi said one of its main themes for next year was that “bonds are back”, adding that it favored government bonds and investment grade debt.
Content of the article
Decades-high inflation and aggressive central bank interest rate hikes have rattled global markets this year.
Advertisement 2
Content of the article
US and German ten-year bond yields have risen more than 200 basis points each this year, the S&P 500 stock index has fallen nearly 16% and the US dollar, supported by Federal Reserve tightening, has climbed 11%.
Vincent Mortier, chief investment officer of Amundi Group, which manages 1.9 trillion euros ($1.98 trillion) in assets, told Reuters the company remained cautious on the stock market outlook but hoped to pull back the ‘next year.
“It’s hard to be very positive in the stock market at current prices,” Mortier said.
Mortier said Amundi was constructive on China, where overall the company had a neutral to positive stance on Chinese equities and credit, citing factors such as hope for a relaxation of tough COVID-19.
Advertisement 3
Content of the article
In Europe, where Amundi anticipates a lasting energy crisis in its central scenario, the asset manager saw a “high probability” that the European Union would issue more common debt.
The EU is already issuing joint bonds for a post-COVID recovery fund of up to 800 billion euros ($879 billion). The war in Ukraine has revived talks about increasing emissions to fund defense and energy security needs.
DOLLAR PEAK
Amundi said that while the US dollar could strengthen further in the short term, it was likely to weaken in the longer term with a peak in US interest rates in sight.
A “substantial majority” of policymakers at the Fed’s meeting earlier this month agreed that it would “probably soon be appropriate” to slow the pace of rate hikes, according to minutes released Wednesday.
Advertisement 4
Content of the article
In a scenario of moderating price pressures and peaking rates, Amundi said it expects the dollar to weaken 4.7% on a trade-weighted basis next year.
“In the short term, we think the US dollar can strengthen a bit and the euro will go back below parity,” Mortier said. “But in the medium to long term, we think the dollar will weaken and the euro will come back towards around $1.06.”
Mortier added that Amundi was overweight the Japanese yen and Swiss franc last week, meaning it expected the two currencies to strengthen.
He said the company was underweight UK government bonds, known as gilts, and the pound, but added it was not “forever”.
While UK markets have stabilized after a rout triggered by a so-called mini-budget in September, sentiment remains fragile, especially as the economy faces a long recession. ($1 = 0.9590 euros) (Reporting by Dhara Ranasinghe; editing by Yoruk Bahceli and Tomasz Janowski)