Amundi, a major asset manager overseeing €2.38 trillion ($2.54 trillion) in assets, has reduced its holdings of US equities and shifted towards short-dated bonds, particularly those in developed markets. This strategic move is a response to what Amundi's Group Chief Investment Officer, Vincent Mortier, perceives as a mispriced market environment and concerns about a looming global growth slowdown. Mortier stated that the firm moved from an overweight to a neutral stance on equities, selling US equities specifically at the start of the recent Middle East conflict.
The firm has added significantly to one- to two-year bonds, anticipating a decrease in yields, which would make these investments profitable. Mortier, however, has expressed skepticism about the traditional safe-haven status of US Treasuries, citing the US government's widening fiscal deficit, currently around 6% to 7% of GDP, and the increasing supply of sovereign debt without a corresponding increase in buyers. This imbalance, he argues, is pushing yields higher as investors demand greater compensation for holding US sovereign risk.
Amundi's primary concern is a global growth slowdown rather than inflation, despite current market fixations on inflationary risks from the Middle East conflict. Mortier believes that while energy prices might temporarily lift headline inflation, underlying price pressures will remain contained. The firm has already lowered its global growth outlook, asserting that economic impacts from the conflict, such as slowing consumption and investment, are already visible, even if the conflict were to end soon. This slowdown is initially expected to be contained within 2026, but prolonged geopolitical instability could further hurt consumer confidence and public finances.
Mortier does not anticipate aggressive rate hikes from central banks like the European Central Bank, Bank of England, or the US Federal Reserve, as he expects inflation to remain under control and growth to decelerate. While the International Monetary Fund has warned of higher inflation and slower growth, Amundi foresees a modest slowdown with manageable inflation, differentiating this period from the 1970s stagflation. The 10-year US Treasury yield recently approached 5%, causing concern among investors, as higher yields typically make bonds more attractive relative to equities and increase borrowing costs across the economy.
