From Washington Noise to Eurasian Opportunities: European Asset Management Giant Amundi Bets on the Rise of Europe and Emerging Markets.

European asset management giant Amundi SA has shifted its long-standing focus on American asset allocation to betting on trends of value added in Europe and emerging markets. The company is preparing to deal with potential new rounds of intense market volatility in US stocks, bonds, and currency markets caused by changes in US tax policies from the White House and global trade policies. The largest asset management giant in Europe stated that its investment stance has shifted towards a "moderate risk preference" and advised investors to consider hedging against inflation and volatile foreign exchange markets. Amundi expects a significant slowdown in US economic growth to 1.6% by 2025-2026. Vincent Mortier, Chief Investment Officer of the asset management firm, said, "The key is to diversify the portfolio, such as shifting from the US to European and emerging market bond assets." In a mid-year outlook report titled "Adapting to policy noise and changes," the global asset management team at Amundi pointed out that the continuous uncertainty of US government policy-making and the growing budget deficit will create an extremely unfavorable background for the economy and markets. Since the beginning of the year, with the determination of the Trump administration to push forward a broad range tariff plan and a massive tax cut bill expected to increase the deficit by $2.4 trillion over the next decade, the so-called "American exceptionalism" has gradually collapsed. This has led to a continuous selling off of US assets by some international investors and even certain Wall Street asset management institutions since the beginning of the year. The benchmark index for US stocks, the S&P 500, has risen by less than 3% this year, while the broad Euro Stoxx 600 index has seen a 20% increase. The asset management giant stated in the report that the aggressive policies towards global trade and international relations advocated by the Trump-led US government constitute a significant "structural" change that will persist beyond the current US government's term. However, Amundi stated that the global macroeconomic environment remains positive for credit markets, and it does not expect a significant decline in corporate earnings. In terms of sovereign currencies, the asset management giant has a long-standing preference for the yen and the euro instead of the US dollar. Despite a rebound in the US dollar index after tensions in US-China trade relations eased, more and more Wall Street investment institutions are expressing the view that this rebound is temporary. They emphasize that a potentially long-term "bear market for the US dollar" has just begun, with the main trigger being the Trump administration's disruptive and chaotic "US economic restructuring actions." The erratic tariff measures and expectations of massive fiscal spending by the Trump administration have caused significant turbulence in financial markets, shaking the confidence of investors in long-term holding of US stocks, bonds, and more broadly, US dollar assets, leading to the gradual collapse of the "American exceptionalism." The asset management firm also indicated that it will focus on European defense and infrastructure as one of its stock investment themes, and it is increasingly paying attention to Asian stock markets, particularly the "Make in India" strategy. Amundi also stated that it holds a positive view on emerging market bonds as they offer higher yields and provide a significant buffer against the volatility in the US government bond market for a 60/40 stock and bond investment portfolio, compared to the US bond market. "This 're-wiring' of the global economy and financial markets will drive global stock market funds to continue rotating towards Europe and emerging markets," Amundi said. Similarly, last week, Jeffrey Gundlach, the CEO of DoubleLine Capital known as the "new bond king," stated that as a result of the Trump administration's series of aggressive policies leading to the gradual collapse of "American exceptionalism," a long-term depreciation trend for the US dollar is almost certain. He predicted that international stocks, particularly those from emerging markets, will continue to outshine the US stock market. "I believe the current trading strategy is to not hold US stocks but hold stocks in other regions of the world. This strategy is clearly working," Gundlach pointed out in a live investor webcast. "The US dollar is now in the early stages of what I think will be a long bear market." DoubleLine Capital, managed by Gundlach, had assets under management of approximately $95 billion as of the end of 2024. He stated that if the US dollar weakens against other currencies and international stocks continue to show strong performance, investors pricing in US dollars may buy overseas stocks - especially those from China, Southeast Asian countries, and other emerging markets - which could benefit from a "double tailwind." This highly watched figure in the investment world pointed out that due to escalating geopolitical tensions and unpredictable policy planning by the Trump administration, foreign investors may be hesitant to invest more capital in the US market, delaying potential new capital inflows and introducing new tailwinds to the international market. "If this trend starts to reverse, there could be a lot of selling. That's one of the key reasons why I advocate holding non-US stocks rather than US stocks," he stated in an interview. Non-US stock markets have significantly outperformed US stocks so far this year. Alongside the "new bond king," Michael Hartnett, chief stock market strategist at Bank of America, who is known as the "most accurate strategist on Wall Street," recently stated that a decline in the US dollar will trigger a selling wave in the US stock market, with the next major bull market expected to occur in emerging markets. A report from the asset management department of JPMorgan recently indicated that over the next 10 to 15 years, the performance of Japanese, European, and Chinese stock markets will outpace that of the US. This forecast and assessment from JPMorgan were made at a time when the US government is expected to deal with long-term depreciation of the US dollar and investors' concerns about increasingly high levels of fiscal debt. JPMorgan stated that US stock market valuations are nearing historical peaks, while European and Japanese stock markets have more moderate valuations, and China's stock market remains at a significant discount.