The key question for investors is to what extent this news has already been reflected in the markets, which tend to react quickly to decisive events such as the outcome of the elections in the United States.
Precisely, in the United States, They expect a slight slowdown in growth, but without reaching a recession, while in Europe growth remains reasonable despite some fiscal restrictions. This market environment offers investment opportunities. Thus, everything indicates that central banks will continue to reduce interest rates in 2025, with falling inflation and solid employment and growth, especially in the United States. The question is what pace these cuts will follow.
Regarding fixed income, the re-election of Donald Trump in the United States also adds some uncertainty to the markets. “We believe that the US economy is too strong for the Federal Reserve cuts rates as much as the market expects, and Trump’s fiscal and tariff policies could increase inflation,” says Víctor de la Morena, Investment Director of Amundi Iberia. For all these reasons, he affirms that the manager maintains “a neutral position in duration in the United States, expecting that the yield curve will steepen and that the Fed will place rates at 3.5% in 2025.”
In Europe, on the other hand, consumption and domestic demand are expected to recover thanks to the ECB’s rate cut and the increase in real incomes. “We foresee that Germany could be left behind due to tariffs, while France and Italy would have modest growth and Spain could once again beat the rest of Europe,” emphasizes Víctor de la Morena.
Government bonds and corporate credit in euros
For all this, in Amundi see value in developed government bonds, as central banks could cut more than expected due to poor growth prospects and limited fiscal space. They also consider that there are opportunities in countries with solid macroeconomic fundamentals such as the United Kingdom, Australia and Norway, unlike in Japanese bonds, since the Bank of Japan could raise rates.
Continuing by asset classes within the fixed income spectrum, they highlight that corporate credit offers attractive opportunities; but in this case the quality, carry and idiosyncratic risks They are important factors to take into account. Along these lines, corporate bonds in euros from the banking and insurance sectors in Europe have better valuations than in the United States.
In terms of diversification, European securitization markets could experience significant changes that would benefit to the European ABS market (asset-backed securities), revived thanks to the European Commission and the Draghi report. Therefore, investors could consider this asset class to diversify their portfolios according to their risk/return objectives.
In conclusion, and according to Amundi’s perspectives, there are reasons for optimism in 2025, with an environment in which the binomial of growth and inflation is slowing, thus creating opportunities in the fixed income markets on a selective basis. «Despite the expected volatility, the low probability of recession, combined with more dovish central banks, could favor credit markets in general, given higher yields than in the past and strong credit fundamentals. Government debt, short-term high yield and investment grade credit, leveraged loans, emerging market bonds and private debt could selectively offer opportunities. European governments are also sources of diversification as inflation slows down,” concludes Víctor de la Morena.
A way to access these asset classes professionally and diversified are investment funds, which allow active management of the different segments of fixed income, sector exposure or duration management by expert teams that seek to identify the best opportunities while managing risks.
Commercial communication for professional investors sponsored by Amundi and for informational purposes only. Not investment advice or recommendation. Investing involves risks. Diversification does not guarantee any profit or protect against loss. Information as of November 2024, subject to changes depending on market conditions and other variables, and it cannot be guaranteed that countries, regions, markets or sectors will have the expected behavior. Amundi Iberia SGIIC, SAU CNMV registration number 31. www.amundi.es..
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