Amundi, a European asset manager, has just shared its insights on the current US policy uncertainty and its implications for global investors.

Despite the recent US tech selloff, Monica Defend, head of Amundi Investment Institute, and Vincent Mortier, group chief investment officer at Amundi, believe that the correction in areas of excessive valuations in the US equity market could continue, leading to a continuation of the recent rotation in favour of Europe and China.

They highlighted how rising uncertainty regarding US President Donald Trump’s policies, particularly the economic impact of tariffs, has increased in recent weeks. This, coupled with weak economic data, has led to a further weakening in US equities, with the Nasdaq Index down almost 10 per cent since the start of the year.

“In contrast, European stocks have outperformed in 2025 thanks to improving sentiment due to a possible ceasefire in the Russia-Ukraine conflict. The European plan for increased defence spending has recently triggered an extreme move in the euro (at its highest value versus the dollar since Trump’s re-election) and European bonds, which have surged in recent weeks at a time when Treasury yields have decreased amid rising concerns over US growth,” they said in a note.

Defend and Mortier emphasised how European equity markets have come a long way in a very short time, and they could now see some stabilisation around current levels. “A pull-back at this point could present opportunities from a long-term perspective. The case for a relative preference for Europe versus the US remains intact, as valuations are more appealing and the fiscal push could support earnings dynamics,” they continued.

“In Asia, Chinese stocks have risen on the back of technology announcements, with internet, autos and telecoms leading the gains,” they added. “The upside in China may be coming at the expense of US companies and, indeed, if the advance in Chinese tech continues, multiples in the US could come under pressure.” Therefore, there could be a continuation of the current rotation out of the US and into European equities.

Paris-based asset manager Carmignac has also started to re-engage with Europe and is slightly overweight in European equities. “European stocks are cheap. US firms are exceptional but so are valuations. There are opportunities in European assets which can act as a great diversifier. We favour sectors in Europe that are not exposed to the economy, such as the aerospace industry and luxury goods,” Kevin Thozet at Carmignac said. 

Despite the drop in US equities last week, Mark Haefele, chief investment officer at UBS Global Wealth Management, believes, however, that while more volatility could be in store as trade tensions remain elevated, stocks could recover in the coming months, with the outlook for US equities remaining favourable. “In our view, if more policy clarity does emerge, this should set the stage for positive catalysts that can restart the equity rally. We also wouldn’t lose sight of the pro-growth elements of the Trump administration agenda that are likely on the horizon.”

Overall, Defend and Mortier believe it is key to maintain a balanced and diversified allocation, including gold and hedges to address the rising risk of downside for equities. Haefele, who also thinks portfolio diversification remains key, likes quality bonds, gold, and alternatives for those able to manage risks such as illiquidity.

On bonds, Defend and Mortier said it is important to maintain an active duration approach. Since the start of the year, they have become more constructive on European duration and, most recently, they have started to move towards neutrality. They also moved to a neutral view on US duration, and expect the US two to 10-year yield curve to steepen.

On credit, Defend and Mortier remain cautious on US high-yield bonds and favour European investment-grade credit. They expect volatility to remain high and believe that there is still room for a further correction for the dollar.

They also think that investors should consider rotation opportunities outside of expensive segments towards attractively priced areas that offer robust earnings prospects. “A well-balanced stance is crucial at this stage,” they said.

While the US economy is slowing faster than had been anticipated, Defend and Mortier do not anticipate a recession in 2025, although fears could increase if policy remains unstable. They believe that tariffs will primarily be a threat to growth rather than have an impact on inflation which, in any case, would be temporary. Therefore, they maintain the view that the US Federal Reserve will cut interest rates in the second quarter of this year.

They said that sentiment outside the US is improving amid increased EU spending, a potential ceasefire in Ukraine and lower energy prices. This further challenges the strength of the dollar: â€śHowever, the lack of execution details on the German fiscal package and uncertainty regarding its growth impact are factors to watch, as they could increase volatility ahead.”