Summary
The GIV elaborates on the latest views, convictions and outlook of our Global CIOs, different Investment Platforms and the Amundi Institute.
After Trump victory, all eyes on inflation
A resilient US economy, the anticipation and eventual victory of Donald Trump and his recent appointments along with risks around inflation have been driving nominal and real yields over the past months. But US equities and the dollar rose amid a belief that the US economy would benefit from Trump’s policies at the expense of the rest of the world, i.e., Europe and some Asian countries.
Three hot questions
1. What is the likely impact of Trump’s announced policy on the US economy and the Fed path
2. What could China’s response to US tariffs be?
3. What could the impact of US elections be on the US dollar?
Diversify towards attractive segments
Trump’s clean sweep in the US elections is positive for near-term growth in the country and should continue to drive market interest. This, at a time when the Fed is cutting rates, should be mildly positive for risk assets. However, we aim to benefit from this through equity segments where valuations are attractive. Interestingly, the same factors that could boost American assets (growth, high deficits etc.), may create upward pressure on US yields, and opportunities around curve steepening.
Stay tactical and granular on duration
The Trump trade has seen a sharp move upward in bond yields and the next leg up should come from the actual implementation of Trump’s agenda around taxation, international trade and immigration etc. In particular, there has been a debate about how much of all this would push up yields at the long end of the curve, but we still see value in the intermediate part.
Play equities beyond US mega caps
Markets have moved quickly to price-in near-term nominal economic growth in the US but we would like to question that narrative because the starting point of the ‘Trump trade’ is different this time when compared to 2016. When Trump was elected President for the first time, US stock valuations, the fiscal deficit and public debt were not as high as they are today. However, this time around, the Fed is in an easing mode, although this could be challenged if there is volatility around inflation.
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