A cloudy US market outlook has underlined the importance of portfolio diversification, with Amundi pointing to more resilient investment opportunities in emerging markets and Europe.
The asset manager’s 2025 mid-year update outlines its mildly pro-risk stance. In equities, it is focusing on valuations and margins, while looking at major themes like European defence, US deregulation, Japanese corporate governance reform and ‘Made in India’.
Amundi added that it prefers financials and communication services over energy and materials, with utilities as a hedge.
It also expects equity investors to continue to rotate away from the US, as the ‘US exceptionalism’ narrative continues to weaken. This shift comes amid rising concerns about the trajectory of US fiscal and trade policy, with the asset manager forecasting US economic growth to fall to 1.6% in 2025-2026 – down from nearly 3% in 2023-2024 – in the face of policy and tariff-prompted uncertainty.
There is also concern regarding the rapidly rising US deficit and national debt, with the former expected to reach 6.5% by 2025 and the latter expected to rise by $3trn to $5trn over the next decade under a scenario which sees the realisation of the Trump administration’s ‘big beautiful bill’.
In contrast to a bleak outlook for the US, Amundi sees reasons for optimism in Europe, citing easing inflation rates, improving trade alliances and a stronger euro, which should support a modest 0.8% in GDP growth across the eurozone and UK in 2025 and 2026.
In emerging markets, India and the Association of Southeast Asian Nations could be long-term structural winners as global supply chains are realigned, Amundi said.
India, in particular, is expected to outstrip China’s GDP growth for 2025 and 2026 at 6.6% and 6.4% versus 4.3% and 3.9%.
With government bond markets “rattled” by the threat of higher debt and rising inflation, Amundi group chief investment officer Vincent Mortier said investors are likely to demand greater compensation for long-dated bonds.
“The name of the game will be diversifying away from the US and into European and emerging market bonds,” he said, as they may benefit from a good growth and inflation mix and a weaker dollar.
This can provide an attractive “buffer” against US treasuries’ yield volatility, Amundi said.
In credit, Amundi also prefers European over US investment-grade, although it remains neutral on high-yield as spreads may rise towards the end of the year.
The need for inflation and currency hedges remains, Amundi said, with gold, infrastructure, private debt and commodities all offering some protection in a more volatile environment.