Gold, the Australian dollar and why Amundi is hedging its optimism

Markets have had a strong run. Corporate earnings are holding up; the AI trade is still attracting capital and optimism around a resolution to the Middle East conflict has pushed risk assets higher. On the surface, the picture looks constructive.

But the latest Amundi investment outlook sends a different signal: the risks markets are currently dismissing are still very much present, and investors should be building protection, not reducing it.

The macro backdrop: reasonable growth, stubborn inflation

The global growth outlook remains reasonable, but divergences are emerging. The US and Europe are pulling in different directions, and above-target inflation is becoming a persistent feature across most developed markets rather than a temporary one.

Francesco Sandrini, CIO Italy and Global Head of Multi-Asset at Amundi, frames the current environment carefully.

“These inflation concerns are more evident in fixed income. Risk assets, on the other hand, have been driven higher by strong corporate earnings, the AI story, and optimism around a resolution to the Middle East conflict. We remain mildly pro-risk, seizing opportunities created by market moves and a greater need to strengthen hedges.”

That last phrase matters. Mildly pro-risk with stronger hedges is not the same as straightforward optimism. It is a considered positioning that acknowledges both the opportunity and the downside.

Equities: positive but protection is warranted

Amundi stays mildly positive on equities, with a preference for US and Emerging Markets Latin equities. But Sandrini is direct about the risks sitting underneath the surface.

“We acknowledge the recent record levels that markets have reached. We believe the risks, geopolitics and US-Iran, that markets are shrugging off remain present. Hence, investors should consider increasing protection on US equities and maintain safeguards in Europe.”

Record market levels with unresolved geopolitical risks are not a combination that calls for complacency. For asset managers and advisers reviewing equity allocations, Amundi’s position suggests the time to add downside protection is now, not after the next shock arrives.

What the Amundi investment outlook says about bonds

In fixed income, Amundi remains positive on US duration, German government bonds and Italian BTPs versus Bunds, as well as Emerging Markets spreads. The exception is Japanese government bonds, where caution prevails.

In European investment grade credit, Amundi has tactically reduced its stance following recent spread tightening. The constructive view on the segment remains intact, supported by attractive carry and robust fundamentals, but the team is waiting for better valuations before upgrading again.

FX: the Australian dollar and Norwegian krone stand out

The foreign exchange calls are among the more interesting elements of Amundi’s current positioning. The team favours commodity-linked and higher-yielding currencies, specifically naming the Australian dollar and the Norwegian krone.

For Australian investors and advisers, the AUD call is worth noting. Amundi’s preference reflects both the currency’s commodity linkages and its yield characteristics in a world where income is increasingly valued.

On the Japanese yen, Amundi has trimmed its constructive stance against the Swiss franc.

Negative real rates in Japan could pressure the yen near term, though recent Bank of Japan interventions signal the central bank’s intention to cap further weakness.

The yen’s attractive valuation and policy divergence between Switzerland and Japan remain supporting factors over the medium term.

Gold: the long-term case remains intact

Amundi’s final call is gold, and the reasoning is straightforward. Over the long term, gold benefits from persistent geopolitical risks and ongoing central bank purchases. Neither of those drivers is going away.

For advisers and asset managers constructing portfolios in an environment of elevated uncertainty, the Amundi investment outlook reinforces a case that is becoming harder to ignore: in a world where risks are present but unpredictable, diversification across asset classes and currencies is not a nice-to-have. It is essential.