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Charting an investment path through the fog

United Kingdom, 4/30/18,  by Amundi

While in 2017 financial markets largely ignored geopolitical risks, as they were more inclined to read the Goldilocks narrative, this mood now appears to be changing. In an environment that is already becoming more volatile, amid less accommodative central banks, demanding valuations, endogenous/technical new features of the market (liquidity deteriorating, crowded trades), a significant shift in fundamentals is not required to trigger market movement. A butterfly may do the trick.

At the time of writing, geopolitical events are dominating the news flow. These new tensions come at a time when trade frictions continue to be in the spotlight. On top of this, there are multiple hot political flashpoints. The first is the US/China relationship, where the focus is now on the practices in technology and intellectual property transfers. The second front relates to the US and Russia, given new sanctions and, most importantly, increasing tensions in Syria and instability in the Middle East. Regarding financial markets, the geopolitical noise is translating into frequent swings, inflows into perceived safe-haven assets (gold, sovereign bonds) and higher oil prices, with the consequence of added uncertainty in monetary policy actions. Central banks, in fact, are already facing the conundrum of how quickly to remove accommodation, as some recent economic data and surveys highlight some moderation of activity while inflation risk appears to be on the upside, potentially amplified by geopolitical and trade tensions. We see three key ways in which investors can navigate through this ‘fog’. First is to keep a strong focus on the macro backdrop, separating noise from fundamentals.

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Amundi is Europe’s largest asset manager by assets under management and ranks in the top 10[1] globally. It manages more than 1.470 trillion[2] euros of assets across six main investment hubs[3]. Amundi offers its clients in Europe, Asia-Pacific, the Middle East and the Americas a wealth of market expertise and a full range of capabilities across the active, passive and real assets investment universes. Clients also have access to a complete set of services and tools. Headquartered in Paris, and listed since November 2015, Amundi is the 1st asset manager in Europe by market capitalization[4].

 

Thanks to its unique research capabilities and the skills of close to 4,500 team members and market experts based in 37 countries, Amundi provides retail, institutional and corporate clients with innovative investment strategies and solutions tailored to their needs, targeted outcomes and risk profiles.

 

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Footnotes

 

  1. ^ [1] Source IPE “Top 400 asset managers” published in June 2018 and based on AUM as of end December 2017
  2. ^ [2] Amundi figures as of September 30, 2018
  3. ^ [3] Investment hubs: Boston, Dublin, London, Milan, Paris and Tokyo
  4. ^ [4] Based on market capitalization as of September 30, 2018

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