The global economic outlook remains positive, with central banks managing inflation without triggering a recession, opening the door to potential rate cuts.
Political shifts in the U.S. and Europe will further influence fiscal policies and market stability, requiring investors to balance opportunities and risks in a complex environment.
Amidst increasing US debt, strong household finances, and a resilient economic backdrop, investors face a complex landscape of macro anomalies.
|
High costs |
>$1.1 trillion will be spent on interest payments in 2024, highest on record1 |
|
Strong |
7.9x net wealth as a share of US disposable income, highest in the past two years2 |
|
Healthy |
in a resilient economic backdrop contrasts with high perceived macro uncertainty |
Market anomalies are evident with extreme US equity valuations, concentrated global markets, and a stark contrast between low equity volatility and high bond volatility.
| High equity concentration |
30% weight of top 7 stocks in the S&P5003 |
| Stretched valuations |
<3% of the time the S&P500 has been more expensive than now since 18814 |
| Diverging volatility trends |
-21% in equity volatility in 2024 vs previous 10-year average +34% in bond volatility5 |
We find ourselves in an unconventional phase of the economic cycle, marked by a mix of positive opportunities and unique challenges such as market concentration and high debt levels.
Although global macro liquidity currently favours riskier assets, increasing policy uncertainty and geopolitical tensions underscore the importance of enhanced diversification.
Investors should consider that geopolitical tensions may drive higher inflation and embrace risk diversifiers like inflation-linked bonds and gold.
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Source: Amundi Investment Institute, Bloomberg.
1 US Treasuries data projection on gross interest payments.
2. Fed FOF, data as of 30 June 2024. Households and Nonprofit Organizations; Net Worth as a Percentage of Disposable Personal Income.
3. Datastream as of October 2024.
4. Shillerdata.com, Robert J. Shiller. Refer to the Shiller CAPE.
5. Analysis on percentage change in average volatility levels in 2024 vs the 2013-2023 average. Bond volatility refers in levels of MOVE index (implied volatility indicator on the Treasury market), equity volatility refers to the VIX Index (implied volatility indicator for the S&P500)
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