How hot is the inflation pot
 
Read online
March 2021
For professional investors only
Photo Header
 
How hot is the inflation pot
If the start of 2021 led markets to question the no inflation forever, the debate has been hotting up in February, with the US 10Y inflation breakeven reaching its highest level since 2014. As the reflation trade continues, our key convictions are:

Still prefer equities to bonds, keeping a tilt towards more cyclical markets (Japan and EM Asia)

Stay risk-on in credit markets to benefit from central banks’ umbrellas and increase the tilt towards SRI in bonds

Start building hedges against inflation risk with breakeven and more generally with an investment approach that tests each investment case against a possible rise in inflation
 
Monthly convictions
Source: Amundi, as of 20 February 2021. The table represents a cross-asset assessment on a three- to six-month horizon, based on views expressed at the most recent Global Investment Committee. The outlook, changes in outlook and opinions on asset class assessment reflect the expected direction (+/-) and the strength of the conviction (+/++/+++). This assessment is subject to change. 
 
EQUITY
Play reflation through a value, cyclical tilt in EM and Japan
– While we believe a rebound in economy should support rotation towards Cyclicals and Value stocks, there is a rising consensus on this trend. As a result, investors should focus on sound businesses and strong balance sheets with a preference for value vs. growth, as a multi-year rebalancing trend. 

– In the short term, any sign of deceleration in economic activity may pause the rotation, but we believe this will be temporary and further reinforced by a steepening of the yield curve and an interest rate rebound.
EM Equities
Difficulties in vaccine production and spread of Covid-19 variants affected some EM but this does not alter our long-term constructive view on the region, with an expected growth of 5.7-6.5% in 2021. Improving economic and earnings momentum coupled with attractive relative valuations vs Developed Markets are bright spots. 
In the heterogeneous EM world, we continue to favour EM Asia, a region that maintains a solid recovery pace, with China and India displaying strong potential and PMI numbers.

Japanese Equities
We remain positive on Japan in light of an improving global economic situation, given the market’s cyclicals and industrials tilt.
The country’s improving shareholder focus and growing return on equity is not yet appreciated by the market: It is still attractively valued compared to its historical P/E ratio and to the US market and has more room to catch up.
​​​​​​​
AMUNDI INDEX MSCI JAPAN SRI UCITS ETF DR
0.18% OGC*

AMUNDI JAPAN TOPIX UCITS ETF
0.20% OGC*

AMUNDI PRIME JAPAN UCITS ETF DR
0.05% OGC*
 
FIXED INCOME
Positive on US inflation, steeper yield curve expectation
 The huge fiscal support, the Fed’s ongoing support coupled with the difficulty in finding skilled labour and the pent-up consumer demand bode well for a steeper US yield curve and rising inflation expectations.

We downgraded our view to become cautious on US duration and upgraded our stance on US inflation.
US inflation & FRN
Market’s inflation expectations rose to their 5-year highs in February in the US, driven by hopes of an economic recovery, strong fiscal stimulus and continuous success of the vaccination programme.
We believe this uptick reflects a long-term regime shift due to the upcoming normalization of the economy. On breakeven, we upgraded our view on US 10Y and are positive on TIPS.
UST 10y yield broke 1.5% at the end of February and is up more than 60 bps over the last 3 months. The 5-30 yield differential increased significantly to reach 160 bps and we believe the US curve can steepen further in the coming weeks.

 
Risk-on stance in EUR credit with a focus on quality
 CBs’ accommodative policies have decoupled markets from the real economy. Investor search for yield has boosted prices for some pockets in the credit market, but appetite for EUR IG remains strong.

 On the other hand, cheaper and low quality assets may fall even more.
Euro Investment Grade Corporate
Euro Credit continues to be supported by ECB’s quantitative easing. We expect limited spread tightening, but the asset class still provides some yield in an environment where rates are expected to remain lower for longer. This warrants a continuous search for carry in EUR IG, particularly in the BBB-rated category. We prefer shorter dated debt in general, in line with our defensive stance on Core Euro duration.
  
 
 
0.20% OGC*
 
COMMODITY
Gold should maintain its spark 
 We reiterate our constructive view on gold, despite the recent correction, as we believe the metal should benefit from a prolonged dovish stance of central banks in the long run.
Precious metals: Gold
Recently, hopes of additional stimulus, particularly in the US, raised economic growth expectations and supported the rise of UST yields. We believe the Fed would continue to promote easy financial conditions to support economic recovery but would accept a mild increase in yields. Thus, we maintain our positive view on gold owing to the Fed’s dovish stance and abundant liquidity. 
If growth is weaker-than-market expectations, the ensuing uncertainty should be positive for gold.
For these reasons, we reiterate our call for having structural gold exposure as it should do well in our base and downside scenarios, as long as CBs maintain easy monetary policies.
 
0.15% TER**
 
Contact us Visit our website Follow us on Twitter Follow us on LinkedIn
 

*Ongoing charges - annual, all taxes included. For Amundi ETF funds, the ongoing charges correspond to the Total Expense Ratio. The ongoing charges represent the charges taken from the fund over a year. When the fund has not closed its accounts for the first time, the ongoing charges are estimated. It compares the annual total management and operating costs (all taxes included) charged to a fund against the value of that fund’s assets. Transaction cost and commissions may occur when trading ETFs.
**The TER is a measure that compares the annual total management and operating costs (all taxes included) charged to a ETC against the value of that ETC’s assets. Transaction cost and commissions may occur when trading ETCs.

Disclaimer
This material is solely for the attention of professional and eligible counterparties, as defined in Directive MIF 2014/65/UE of the European Parliament acting solely and exclusively on their own account, or Institutionals, and acting exclusively on their own account. In Switzerland, it is solely for the attention of qualified investors within the meaning of Article 10 paragraph 3 a), b), c) and d) of the Federal Act on Collective Investment Scheme of June 23, 2006. This document is not intended for citizens or residents of the United States of America or to any «U.S. Person», as this term is defined in SEC Regulation S under the U.S. Securities Act of 1933. The US person definition is indicated in the legal mentions section on www.amundi.com, or www.amundietf.com, and in the prospectus of the Funds as defined below.
Promotional and non-contractual information, which should not be regarded as an investment advice or an investment recommendation, a solicitation of an investment, an offer or a purchase.
Since this certain information contained in this document may be analysed as an investment recommendation, it is explicitly stated that this document has not been prepared by reference to the regulatory requirements that seek to promote independent financial analysis. Accordingly, Amundi AM, in its capacity as investment service provider, remains free to carry out transactions in respect of the financial instruments referred to in this document. Amundi AM accepts no liability, whether direct or indirect, that may result from using any information contained in this document or from any decision taken the basis of the information contained in this document.
This material contains a selection of strategies and investment scenarios that reflect only the opinion of the Amundi Research and Strategy team. Their last publications are available on amundietf.com or www.research-center.amundi.com.
Amundi does not accept any liability, responsibility or duty of care, whatsoever, with respect to the information or its any use. Amundi does not give any guarantee (whether express or implied), warranty, undertaking or representation as to the accuracy, validity, relevance, exhaustiveness, timeliness, completeness and/or reliability of the information.
The opinions expressed reflect the current judgement of Amundi investment personnel and may be subject to change without notice. Amundi shall be under no obligation to update the information. It is based on sources considered as reliable and may change without prior notice. It is inevitably partial, provided based on market data stated at a particular moment.
Some of the funds domiciled in France (“French Funds”) and/or sub-funds of the Amundi Index Solutions SICAV (together the “Funds”) described in this document may not be authorized for distribution in your country. Before any subscriptions, the potential investor must read the regulatory documents of the Funds approved by the Autorité des Marchés Financiers for French Funds or by the Commission de Surveillance du Secteur Financier of Luxembourg for the sub-funds of the Luxembourg Sicav Amundi Index Solutions, including the KIID, available on www.amundi.com or www.amundietf.com. Investment in a Fund carries a substantial degree of risk (i.e. risks are detailed in the DICI and prospectus). Transaction cost and commissions may occur when trading ETFs. The policy regarding portfolio transparency and information on the funds’ assets are available on amundietf.com. The Funds offer no capital protection.
Amundi ETF funds are neither sponsored, approved nor sold by the index providers. The index providers do not make any declaration as to the suitability of any investment. A full description of the indices is available from the providers.
AMUNDI PHYSICAL GOLD ETC (the “ETC”) is a series of debt securities governed by Irish Law and issued by Amundi Physical Metals plc, a dedicated Irish vehicle (the “Issuer”). The Base Prospectus, and supplement to the Base Prospectus, of the ETC has been approved by the Central Bank of Ireland (the “Central Bank”), as competent authority under the Prospectus Directive. Pursuant to the Directive Prospective Regulation, the ETC is described in a Key Information Document (KID), final terms and Base Prospectus (hereafter the Legal Documentation). The ETC KID must be made available to potential subscribers prior to subscription. The Legal Documentation can be obtained from Amundi on request. The distribution of this document and the offering or sale of the ETC Securities in certain jurisdictions may be restricted by law. For a description of certain restrictions on the distribution of this document, please refer to the Base Prospectus. The investors are exposed to the creditworthiness of the Issuer.
Information reputed exact as of March 2021
. Amundi ETF designates the ETF business of Amundi Asset Management. Amundi Asset Management, French “Société par Actions Simplifiée”- SAS with capital of 1 086 262 605 euros - Portfolio Management Company approved by the AMF under number GP 04000036 - Registered offce: 90, boulevard Pasteur - 75015 Paris – France - 437 574 452 RCS Paris. Reproduction prohibited without the written consent of the Management Company.
France: Some information may constitute a general investment recommendation as defined in the article 313-208 of the Réglement Général de l’AMF. This material has not been produced in conformity with regulatory provisions aiming to promote the independency of financial analysis, and Amundi Asset Management, as an investment services provider, has no restriction in negotiating any financial instruments described in this material before its issue. Des seuils de réservation sont fixés en appliquant un pourcentage de variation de la part, indiqué dans le prospectus du Fonds mentionné dans ce Document et d’autre de la Valeur Liquidative Indicative ou « VLi » de ce Fonds, publié par Euronext Paris SA et actualisée de manière estimative en cours de séance en fonction de la variation de l’indice de chacun des Fonds indiqués dans ce Document; Le Teneur de Marché s’assure que le cours de bourse des parts du Fonds ne s’écarte pas plus du pourcentage indiqué dans le prospectus du Fonds mentionné dans ce Document et d’autre de la valeur liquidative de l’OPCVM, afin de respecter les seuils de réservation fixés par Euronext Paris SA.
United Kingdom: This document is being issued inside the United Kingdom by Amundi Asset Management which is authorised by the AMF under number GP04000036 and subject to limited regulation by the Financial Conduct Authority for the conduct of investment business in the UK under number 401883 with its registered offce at 41 Lothbury, London EC2R 7HF. Details about the extent of our regulation by the Financial Conduct Authority are available from us on request All products mentionned ion this document are recognized collective investment schemes for the purposes of the Financial Services and Markets Act 2000 of the United Kingdom (the “Act”). This document is only directed at persons who are professional clients or eligible counterparties for the purposes of the FCA’s Conduct of Business Sourcebook. The investments described herein are only available to such persons and this document must not be relied or acted upon by any other persons. This document may not be distributed to any person other than the person to whom it is addressed without the express prior consent of Amundi.
Germany: Die Verkaufsunterlagen der in Deutschland zum öffentlichen Vertrieb registrierten Amundi ETFs sind auf Anfrage kostenlos und als Druckstücke bei Marcard, Stein & Co. AG, Ballindamm 36, 20095 Hamburg, Deutschland, erhältlich. Bei den Fonds handelt es sich um Organismen für gemeinsame Anlagen, die von der AMF zugelassen sind.
Spain: This material is intended solely to institutional investors , professional, qualified or sophisticated and to distributors. Amundi Iberia SGIIC, SAU, principal distributor, supervised by the CNMV and registered with the No. 31, with address at Paseo de la Castellana nº 1, 28046 Madrid. The legal documentation of the Funds is also available on www.amundi.com.
Switzerland: Amundi ETF Funds available for distribution to all investors: This AMUNDI ETF Fund has been authorized for distribution to non-qualified investors in or from Switzerland by the Swiss Financial Market Supervisory Authority (“FINMA”). Subscriptions in the ETF Fund will only be accepted on the Fund’s the Key Investor Information Document (“KIID”) and the prospectus, or the fund’s regulation as well as the annual and semi-annual financial reports that may be obtained free of charge from the Swiss Representative. Swiss Representative: CACEIS (Switzerland) SA - Route de Signy 35 - CH1260 Nyon. Paying Agent in Switzerland: CACEIS Bank, Paris, Nyon branch / Switzerland - Route de Signy 35 – CH- 1260 Nyon. Amundi ETF Funds aimed at qualified investors only: This Amundi ETF Fund (collective investment schemes) authorized by the AMF, has not been approved by FINMA. This Amundi ETF Fund is available in Switzerland for distribution exclusively to Qualified Investors, as defined in the Collective Investment Schemes Act of 23 June 2006, as amended (“CISA”) and its implementing ordinance. The KIID, prospectus, fund’s regulation and annual and/or semi-annual financial reports relating to this Amundi ETF Fund are available free of charge from the Swiss Representative or from authorised distributors to Qualified Investors. Swiss Representative: CACEIS (Switzerland) SA - route de Signy 35 – CH 1260 Nyon. Paying Agent in Switzerland: CACEIS Bank, Paris, Nyon branch / Switzerland - Route de Signy 35 – CH- 1260 Nyon.
Sweden: The funds have been passported into Sweden pursuant to the Swedish Securities Funds Act (as amended) (Sw. lag (2004:46) om värdepappersfonder), implementing the UCITS IV Directive and may accordingly be distributed to Swedish investors. The Key Investor Information Document (“KIID”) (in Swedish) and the prospectuses for the funds, as well as the annual and semi-annual reports are also available from the Swedish paying agent free of charge. The name and details of the Swedish paying agent are: SKANDINAVISKA ENSKILDA BANKEN AB (publ) through its entity Transaction Banking, SEB Merchant Banking, with its principal offces at Kungsträdgårdsgatan 8, SE-106 40 Stockholm, Sweden.
Austria: The sales documentation of the Sub-Funds registered for public marketing in Germany are available free of charge and as printed copies at MEINL BANK AG an Austrian Bank with its registered offce at Bauernmarkt 2, 1014 Wien, Austria, represented by Mr Robert Kelfer and Mr Peter Grandl as Director of Meinl Bank A.G. and Director of Meinl Bank A.G.
We have updated our Privacy Policy and Cookie Policy. We encourage you to review the full Privacy Policy here. If you have any questions about these changes, please reach out to us using the contact information provided in the privacy policy.
If you do not wish to receive further information from Amundi, please use the "Unsubscribe" link below.

Unsubscribe