Looming divergences and the great asset repricing
 
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May 2022
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Looming divergences and the great asset repricing
We are witnessing significant divergences in the economic outlook (we have revised down the EU and Chinese economic outlooks vs. the more resilient US economy) and in market performances.

The main themes driving the fortunes of bonds - close to double digits loses since the beginning of the year - have been inflation and the hawkishness of central banks, while in equity markets the risks to the economic outlook (arising from the conflict for Europe and from the zero tolerance Covid approach for China) have recently gained investors’ attention.

Against this backdrop, while investors should maintain a neutral risk stance, we believe there is room to play these divergences across the different asset classes: 

– In Equities, we recommend a neutral stance on global equities. At the regional level, the US should prove more resilient than Europe where the earnings season appears more challenging.

– In Fixed Income, inflation remains the key element that investors should consider in building their asset allocation.

–  Gold remains a good portfolio diversifier in the current context.
 
Monthly convictions
Amundi Monthly Cross-Asset Convictions
Source: Amundi. 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 the asset class assessment reflect the expected direction (+/-) and the strength of the conviction (+/++/+++). This assessment is subject to change. BoE = Bank of England, EM/GEM = emerging markets, FX = foreign exchange, FI = fixed income, IG = investment grade, HY = high yield, CBs = central banks, BTP = Italian government bonds, EMBI = EM Bonds Index.
 
EQUITY
Tactically positive on US equities
Strong consumer spending and labour markets will support overall demand, allowing us to believe that a recession is unlikely, though we may see some pressures on economic growth. Interestingly, earnings are likely to increase due to inflation but given that real yields are close to positive and nominal yields are rising, we are watching how these affect equities. Thus, we are exploring companies 1/ with strong operational efficiencies and business models resilient to geopolitical risks and 2/ those with a tendency to reward shareholders by returning excess cash through dividends or buybacks. Indeed, there seems to be a shift back into share repurchases and dividend payout policies to reward shareholders. Overall, a balanced stance is recommended.

LYXOR S&P 500 UCITS ETF
0.09% OGC*

AMUNDI INDEX MSCI USA SRI PAB - UCITS ETF DR
0.18% OGC*

AMUNDI S&P 500 BUYBACK UCITS ETF
0.15% OGC*

 
FIXED INCOME
Focus on Inflation...
The US CPI headline was at 8.5% YoY in March indicating that inflation may have reached its peak. In Europe, price pressures on certain components of the CPI basket have built up. The inflation outlook is highly uncertain as the geopolitical risks from the conflict remain high and supply chain stress in Asia is on the rise amid the Covid lockdown in Shanghai.
In this context, inflation expectations remain well above the start of the year levels and the CB’s objectives, with the one-year US inflation breakeven at 5.7% vs. 3.5% at the beginning of the year.

... and FRNs
Our structural view remains that we are likely in the midst of a regime change in global interest rates and that rates are likely to be structurally higher going forward.
In this context, Floating-Rate Notes offer an alternative to investors which pays a spread above current short-term rates and enjoy the benefit of future rate increases.




A preference for Euro corporate bonds
In Europe, corporate bonds present a mixed picture where spreads have retraced from the levels seen in early March and even corporate fundamentals in the form of balance sheets remain solid. However, sentiment is fragile owing to high inflation, potentially higher core yields, and economic growth concerns. while the long-term move towards higher core rates holds true, the geopolitical tensions and market stress are currently putting downward pressure on yields, we are slightly less defensive on duration in core Europe.

AMUNDI INDEX EURO CORPORATE SRI 0-3Y - UCITS ETF DR
0.12% OGC*

AMUNDI INDEX EURO CORPORATE SRI - UCITS ETF DR
0.14% OGC*

 
COMMODITY
Safe-haven demand remains strong for gold
Precious metals: Gold
Historically, gold has been used to provide protection against potential tail risks during times of market stress as it has tended to rise during stock market falls. As such, it may be able to help preserve capital during times of geopolitical stress. In the near term, gold may be an interesting diversifier when the upward pressure on rates fades, as well as considering it might be in demand from central banks as a reserve for value.
 
 
 
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*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.

KNOWING YOUR RISK
It is important for potential investors to evaluate the risks described below and in the fund’s Key Investor Information Document (“KIID”) and prospectus available on our websites www.amundietf.com or www.lyxoretf.com (as the case may be).
CAPITAL AT RISK - ETFs are tracking instruments. Their risk profile is similar to a direct investment in the underlying index. Investors’ capital is fully at risk and investors may not get back the amount originally invested.
UNDERLYING RISK - The underlying index of an ETF may be complex and volatile. For example, ETFs exposed to Emerging Markets carry a greater risk of potential loss than investment in Developed Markets as they are exposed to a wide range of unpredictable Emerging Market risks.
REPLICATION RISK - The fund’s objectives might not be reached due to unexpected events on the underlying markets which will impact the index calculation and the efficient fund replication.
COUNTERPARTY RISK - Investors are exposed to risks resulting from the use of an OTC swap (over-the-counter) or securities lending with the respective counterparty(-ies). Counterparty(-ies) are credit institution(s) whose name(s) can be found on the fund’s website amundietf.com or lyxoretf.com. In line with the UCITS guidelines, the exposure to the counterparty cannot exceed 10% of the total assets of the fund.] 
CURRENCY RISK – An ETF may be exposed to currency risk if the ETF is denominated in a currency different to that of the underlying index securities it is tracking. This means that exchange rate fluctuations could have a negative or positive effect on returns.
LIQUIDITY RISK – There is a risk associated with the markets to which the ETF is exposed. The price and the value of investments are linked to the liquidity risk of the underlying index components. Investments can go up or down. In addition, on the secondary market liquidity is provided by registered market makers on the respective stock exchange where the ETF is listed. On exchange, liquidity may be limited as a result of a suspension in the underlying market represented by the underlying index tracked by the ETF; a failure in the systems of one of the relevant stock exchanges, or other market-maker systems; or an abnormal trading situation or event.
VOLATILITY RISK – The ETF is exposed to changes in the volatility patterns of the underlying index relevant markets. The ETF value can change rapidly and unpredictably, and potentially move in a large magnitude, up or down.
CONCENTRATION RISK – Thematic ETFs select stocks or bonds for their portfolio from the original benchmark index. Where selection rules are extensive, it can lead to a more concentrated portfolio where risk is spread over fewer stocks than the original benchmark.

IMPORTANT INFORMATION
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. It is not directed at retail clients. 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 information is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities or services in the United States or in any of its territories or possessions subject to its jurisdiction to or for the benefit of any U.S. Person (as defined in the prospectus of the Funds or in the legal mentions section on www.amundi.com, www.amundietf.com  and www.lyxoretf.com). The Funds have not been registered in the United States under the Investment Company Act of 1940 and units/shares of the Funds are not registered in the United States under the Securities Act of 1933.
This material reflects the views and opinions of the individual authors at this date and in no way the official position or advices of any kind of these authors or of Amundi Asset Management nor Lyxor International Asset Management and thus does not engage the responsibility of Amundi Asset Management nor Lyxor International Asset Management nor of any of its officers or employees. This research is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It is explicitly stated that this document has not been prepared by reference to the regulatory requirements that seek to promote independent financial analysis. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Neither Amundi Asset Management nor Lyxor International Asset Management accept 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. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice. Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients and principal trading desks that reflect opinions that are contrary to the opinions expressed in this research. Our asset management area, principal trading desks and investing businesses may make investment decisions that are inconsistent with the recommendations or views expressed in this research.
This document is of a commercial nature. The Funds described in this document may not be available to all investors and may not be registered for public distribution with the relevant authorities in all countries. It is each investor’s responsibility to ascertain that they are authorised to subscribe, or invest into this product. Prior to investing in the product, investors should seek independent financial, tax, accounting and legal advice.
This is a 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, from Amundi Asset Management (“Amundi”) nor any of her subsidiaries, nor Lyxor International Asset Management (“Lyxor”) and Lyxor Asset Management UK LLP (“Lyxor UK”).
The Funds are respectively Amundi UCITS ETFs (“Amundi ETF”) and Lyxor UCITS ETFs (“Lyxor ETF”). Amundi ETF designates the ETF business of Amundi and includes the funds under both Amundi ETF and Lyxor ETF denomination.
The Funds are French or Luxembourg open ended mutual investment funds respectively approved by the French Autorité des Marchés Financiers or by the Luxembourg Commission de Surveillance du Secteur Financier, and authorized for marketing of their units or shares in various European countries (the Marketing Countries) pursuant to the article 93 of the 2009/65/EC Directive. The Funds can be sub-funds of the following umbrella structures:
For Amundi ETF: Amundi Index Solutions, Luxembourg SICAV, RCS B206810, located 5, allée Scheffer, L-2520, managed by Amundi Luxembourg S.A.
For Lyxor ETF: 
- Multi Units France, French SICAV, RCS 441 298 163, located 91-93, boulevard Pasteur, 75015 Paris, France, managed by Lyxor International Asset Management
- Multi Units Luxembourg, RCS B115129 and Lyxor Index Fund, RCS B117500, both Luxembourg SICAV located 28-32, place de la Gare, L-1616 Luxembourg, and managed by Lyxor International Asset Management
- Lyxor SICAV, Luxembourg SICAV, RCS B140772, located 5, Allée Scheffer, L-2520 Luxembourg, managed by Lyxor Funds Solutions
Before any subscriptions, the potential investor must read the offering documents (KIID and prospectus) of the Funds. The prospectus in French for French UCITS ETFs and in English for Luxembourg UCITS ETFs, and the KIID in the local languages of the Marketing Countries are available free of charge on www.amundi.com, www.amundietf.com and www.lyxoretf.com or upon request to client-services-etf@lyxor.com. They are also available from the headquarters of the Amundi Index Solutions SICAV, or the headquarters of Lyxor International Asset Management (as the management company of Multi Units Luxembourg, Multi Units France and Lyxor Index Fund) or of Lyxor Funds Solutions (as the management company of Lyxor SICAV).
Investment in a fund carries a substantial degree of risk (i.e. risks are detailed in the KIID and prospectus). Past Performance does not predict future returns. Investment return and the principal value of an investment in funds or other investment product may go up or down and may result in the loss of the amount originally invested.  All investors should seek professional advice prior to any investment decision, in order to determine the risks associated with the investment and its suitability.
It is the investor’s responsibility to make sure his/her investment is in compliance with the applicable laws she/he depends on, and to check if this investment is matching his/her investment objective with his/her patrimonial situation (including tax aspects). 
Please note that the management company may de-notify arrangements made for marketing as regards units/shares of the Fund in a Member State of the EU in respect of which it has made a notification.
A summary of information about investors’ rights and collective redress mechanisms can be found in English on the regulatory page at https://about.amundi.com/Metanav-Footer/Footer/Quick-Links/Legal-documentation with respect to Amundi ETFs, and, at https://www.lyxor.com/en/investors-rights-2021-en with respect to Lyxor ETFs. 
This document was not reviewed, stamped or approved by any financial authority.
This document is not intended for and no reliance can be placed on this document by persons falling outside of these categories in the below mentioned jurisdictions. In jurisdictions other than those specified below, this document is for the sole use of the professional clients and intermediaries to whom it is addressed. It is not to be distributed to the public or to other third parties and the use of the information provided by anyone other than the addressee is not authorised.
This material is based on sources that Amundi for Amundi ETF, and Lyxor and Lyxor UK for Lyxor ETF consider to be reliable at the time of publication. Data, opinions and analysis may be changed without notice. Amundi, Lyxor and Lyxor UK accept no liability whatsoever, whether direct or indirect, that may arise from the use of information contained in this material. Amundi or Lyxor can in no way be held responsible for any decision or investment made on the basis of information contained in this material.
Updated composition of the product’s investment portfolio is available on www.amundietf.com or www.lyxoretf.com. Units of a specific UCITS ETF managed by an asset manager and purchased on the secondary market cannot usually be sold directly back to the asset manager itself. Investors must buy and sell units on a secondary market with the assistance of an intermediary (e.g. a stockbroker) and may incur fees for doing so. In addition, investors may pay more than the current net asset value when buying units and may receive less than the current net asset value when selling them.
Indices and the related trademarks used in this document are the intellectual property of index sponsors and/or its licensors. The indices are used under license from index sponsors. The Funds based on the indices are in no way sponsored, endorsed, sold or promoted by index sponsors and/or its licensors and neither index sponsors nor its licensors shall have any liability with respect thereto. The indices referred to herein (the “Index”) are neither sponsored, approved or sold by Amundi nor Lyxor nor Lyxor Funds Solutions. Neither Amundi nor Lyxor nor Lyxor Funds Solutions shall assume any responsibility in this respect. 
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.
In EEA Member States, the content of this document is approved by Amundi and Lyxor for use with Professional Clients (as defined in EU Directive 2004/39/EC) only and shall not be distributed to the public. 
Information reputed exact as of the date mentioned above.
Reproduction prohibited without the written consent of Amundi. 


SPAIN
The Funds are foreign undertakings for collective investment registered with the CNMV. Luxembourg Funds were approved for public distribution in Luxembourg by the Commission de Surveillance du Secteur Financier of Luxembourg. French Funds were approved by the French Autorité des Marchés Financiers.
For Amundi ETF: Amundi ETFs approved by the Commission de Surveillance du Secteur Financier are numbered: Amundi Index Solutions (1495). Amundi Index Solutions is a Luxembourg SICAV, RCS B206810, located 5, allée Scheffer, L-2520 Luxembourg. 
For Lyxor ETF: Lyxor ETFs approved by the French Autorité des Marchés Financiers are numbered:
- Multi Units France (319). Multi Units France is a French SICAV, RCS 441 298 163, located 91-93, boulevard Pasteur, 75015 Paris, France. Lyxor ETFs approved by the Commission de Surveillance du Secteur Financier are numbered: 
- Multi Units Luxembourg (920), RCS B115129 and Lyxor Index Fund (760), RCS B117500, both located 28-32, place de la Gare, L-1616 Luxembourg, and
- Lyxor SICAV, RCS B140772, located 5, Allée Scheffer, L-2520 Luxembourg.
Information and documents are available on www.lyxoretf.com, and upon request to client-services-etf@lyxor.com, and also free of charge from:
- Lyxor International Asset Management, 91-93 boulevard Pasteur, 75015 Paris, France – société par actions simplifiée – registered under number 419 223 375 with RCS of Paris (management company of Multi Units France, Multi Units Luxembourg and Lyxor Index), or
- Lyxor Funds Solutions, 5, Allée Scheffer, L-2520 Luxembourg – registered under number B139351 with the RCS of Luxembourg (management company of Lyxor SICAV)
Any investment in the Funds must be made through a registered Spanish distributor. Amundi Iberia SGIIC, SAU, is the main distributor of the Funds in Spain, registered with number 31 in the CNMV's SGIIC registry, with address at Pº de la Castellana 1, Madrid 28046, Spain. A list of all Spanish distributors may be obtained from the CNMV at www.cnmv.es. Units/shares may only be acquired on the basis of the most recent prospectus, key investor information document and further current documentation, which may be obtained from the CNMV.
The legal documentation of the Funds is also available on the web page www.amundi.com and www.lyxoretf.com.

SWITZERLAND
Amundi Suisse SA is distributing in Switzerland and from Switzerland the collective investment schemes managed by Amundi Asset Management and /or Amundi Luxembourg. In this respect, Amundi Suisse SA informs investors that it collects, from Amundi Asset Management and/ or Amundi Luxembourg, a compensation under article 34 al. 2bis in the Ordinance on collective investment schemes (Ordonnance sur les placements collectifs de capitaux, OPCC). This compensation can constitute a part of the management fees stated in the prospectus. Additional information regarding the existence, nature and calculation method for the compensation received by Amundi Suisse SA within the frame of its distribution activity in Switzerland or from Switzerland may be provided upon written request to Amundi Suisse, SA 6-8 rue de Candolle, 1205 Genève, Suisse.
This document is for qualified investors (as defined in Swiss Federal Act on Collective Investment Schemes of 23 June 2006 as amended or supplemented) use only and shall not be offered to the public. 
For Amundi ETF: The Representative and Paying Agent for Funds registered for public offering in Switzerland is for Amundi Index Solutions SICAV: Representative - CACEIS (Switzerland) SA and Paying Agent, CACEIS Bank, Nyon Branch both at 35 Route de Signy, Case postale 2259, CH-1260 Nyon. Free copies of the prospectus, key investor information documents, annual and semi-annual reports, management regulations and other information are available at the representative’s address shown above. 
For Lyxor ETF: The Representative and the Paying Agent of the Fund(s) in Switzerland is Société Générale, Paris, Zurich Branch, Talacker 50, CH-8001 Zurich. The prospectus or offering memorandum, the key investor information documents, the management regulation, the articles of association and/or any other constitutional documents as well as the annual and semi-annual financial reports may be obtained free of charge from the Representative in Switzerland. The prospectus, the key investor information documents, the articles of association and/or the annual reports may be obtained free of charge from the Representative in Switzerland.

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. 
For Amundi ETF and Lyxor ETF: 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 offices at Kungsträdgårdsgatan 8, SE-106 40 Stockholm, Sweden.

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