In the first half of 2025, global capital markets have been navigating a period of profound structural transformation. A confluence of shifting geopolitical dynamics, evolving trade policies, and diverging monetary strategies is reshaping the global investment landscape, presenting unprecedented challenges for asset allocation.
Against this complex backdrop, Southern Finance conducted an exclusive interview with Vincent Mortier, Chief Investment Officer of Amundi—the largest asset management company in Europe—to explore the latest trends in global capital flows and strategic investment realignment.
Mortier highlighted a distinct “dual-track” pattern in global markets: on one hand, U.S. equities continue to hit record highs amid a narrative of economic exceptionalism, with the S&P 500’s forward price-to-earnings ratio reaching 22 to 23 times. On the other hand, the growth gap between developed and emerging markets is widening, positioning Asia as a new value hub for global capital.
Notably, China’s A-share market stands out with compelling valuation advantages—the average P/E ratio of CSI 500 constituents remains below 10, presenting a significant discount compared to Western markets.
On the monetary front, Mortier expects the U.S. Federal Reserve to begin a rate-cut cycle in the second half of 2025, though he emphasized that the timing will remain highly data-dependent.
As a firm managing over 2 trillion euros in assets, Amundi’s investment shifts serve as a bellwether for global asset allocation. In this in-depth interview, Mortier outlines a core strategy focused on “emerging market overweight, high-quality credit, and defensive equities,” with a particular emphasis on strategic positioning in China’s onshore markets.
He also shared his optimism about the broader economic spillover effects of AI, underscoring the cross-sector impact of innovation-driven growth.
Southern Finance: How have rising tariff tensions and shifting global trade policies influenced your overall approach to asset allocation in 2025? How do you balance defensively positioning portfolios with capturing growth opportunities amid ongoing geopolitical uncertainty and tariff-driven market volatility?
Vincent Mortier: You’ve summarized the core challenge we’re facing today quite accurately. On one hand, we see growing clouds on the horizon—rising tariffs, elevated public debt, increasing global tensions, intensifying competition, and unstable correlations between asset classes. All of this calls for greater caution.
On the other hand, it's true that there is still a great deal of liquidity in the market. Many investors—particularly in the U.S.—remain willing to take on more risk, even using leverage, to chase market gains. So we’re witnessing a confrontation between these two opposing forces.
So far, the market has held up relatively well, but we cannot afford to be complacent. The level of risk has clearly increased. Now more than ever, we believe in the importance of diversification and avoiding excessive concentration, because eventually something will have to give. You're absolutely right—risks remain elevated, and uncertainty is still very much in play.
Southern Finance: Have you observed any long-term structural changes in global capital flows?
Vincent Mortier: Yes, we’re beginning to see changes—slowly but surely. U.S. investors still dominate the market, so the shift is gradual. But the starting point is quite extreme: the U.S. now holds a significantly negative net capital position. The era, like last year, when there were effectively no alternatives to U.S. assets, is coming to an end.
We’ve noticed our clients beginning to reassess their strategic asset allocation—again, very gradually. The first area of concern has been the U.S. dollar. Investors are asking: is it still reasonable to hold such a large portion of portfolios in U.S. dollars? Should we hedge part or even all of our dollar exposure? That’s the first step.
From there, we’ve started to see some initial reallocations of capital—toward Europe, Asia, and non-U.S. credit. These moves are not yet coming from U.S. investors, to be clear, but rather from European and Asian investors who are gradually diversifying away from U.S.-centric portfolios.
Southern Finance: U.S. equities have not only recovered from the tariff-driven selloff in April but have also recently reached new all-time highs. What do you see as the key factors driving this market resilience?
Vincent Mortier: Yes, you're right—we are at or near all-time highs for U.S. equities. This rally is largely driven by a prevailing belief among many investors that a new era of U.S. exceptionalism is on the horizon—exceptionalism in terms of economic growth, corporate margins, earnings power, and even geopolitical influence, both soft and hard. There’s a conviction that we’re heading back to the “good old days,” with GDP growth of 3%, 4%, even 5%, and double-digit or higher earnings growth. That belief continues to support the idea that U.S. assets—especially U.S. equities—remain the place to be.
But we also need to acknowledge that U.S. equities are currently trading at around 22 to 23 times forward earnings, which is extremely high by historical standards. To justify such elevated price-to-earnings ratios, one would need to be extremely confident that U.S. exceptionalism will persist for many years. It might happen—that’s what many U.S. investors are banking on—but it might not.
In my view, there’s a possibility that the U.S. economy will normalize. And if that’s the case, there would be little justification for paying such a premium. That’s the real question at stake. It’s also fair to say that a degree of greed—or what Keynes called “animal spirits”—is fueling the market. Investors are buying any dip, betting that the rebound will come quickly and they’ll profit.
Southern Finance: Given recent trends in unemployment and inflation data, what is your outlook for the Federal Reserve’s monetary policy trajectory in the second half of 2025? How might that influence your portfolio allocation strategy at Amundi?
Vincent Mortier: Yes, the Federal Reserve is indeed under significant pressure to cut rates—but there's no need to rush. Chair Powell has taken a cautious stance for good reason, waiting for more data before making a move.
On the employment front, I believe the U.S. job market will remain resilient. One key factor is immigration policy. With fewer immigrant workers entering the labor force, there’s simply a smaller pool of available labor, which—somewhat paradoxically—supports tighter labor market conditions. So in that sense, the job market could remain strong.
As for inflation, it’s still unclear how much of the recent tariff-related price increases will be passed on to consumers versus absorbed by corporate margins. I believe it will be a mix of both. This means corporate earnings could take a modest hit, as companies may not be able to fully pass on costs.
What’s critical for understanding the Fed’s next move is the trajectory of U.S. economic growth. If we see a meaningful slowdown or an increased risk of recession, we expect Chair Powell to act. At Amundi, our base case includes two to three rate cuts in 2025, as we believe the Fed still has room to ease. We don’t expect inflation to surge, but it may drift slightly higher. Still, if the economy weakens as we anticipate, the Fed is likely to cut rates—though probably not immediately, but more likely toward the end of the year.
Southern Finance: Looking ahead, which sectors or regions are you most optimistic about in the second half of 2025? What macro or structural themes are driving your views?
Vincent Mortier: I think this is where we need to be a bit contrarian—not simply following the consensus. First and foremost, we’re seeing a clear trend of stronger economic growth across emerging markets, particularly in Asia, while developed markets—Japan, Europe, the UK, and the U.S.—are broadly slowing. The growth differential between emerging and developed economies is widening. As a result, we expect long-term, secular earnings growth to come increasingly from Asia and Latin America rather than developed economies.
This is why we remain overweight and optimistic on emerging markets overall—with particular conviction in India, South Asia, and China. That may not sound like a controversial view, but we think it’s underappreciated in current positioning.
Our second conviction relates to the growing pressure on sovereign debt levels globally. In contrast, many high-grade corporates remain in solid financial health. So we prefer high-quality corporate credit, where yields are now comparable—or in some cases superior—to those of government bonds, without a material increase in credit risk. We’re overweight high-quality credit, and only high-quality. We believe it will continue to perform well.
On the equity side, we favor a more defensive approach. Broadly speaking, we prefer value stocks over growth names, particularly in the U.S., where growth stocks have already run up significantly and are, in our view, too expensive. Within the U.S. market, we like sectors such as natural resources and traditional “old school” industries like utilities. In Europe, we’re finding opportunities in small and mid-cap companies, as well as selective growth names. And across Asia—from Japan to India—we continue to see compelling structural opportunities.
Lastly, we remain underweight the U.S. dollar.
Southern Finance: Which sectors in China are you watching most closely from both a valuation and macro trend perspective?
Vincent Mortier: In China, we have a clear preference for domestically listed names—specifically the A-share market rather than the H-share market. We prefer to go onshore. Within the A-share market, we focus more on the broader market—for example, the CSI 500, which is the Chinese equivalent of the S&P 500 in terms of breadth, rather than the largest caps or well-known index names like those in the A50.
Within that universe, we’re finding many companies we like: privately owned, profitable, and with strong growth prospects. These range from technology players to more traditional sectors. We believe domestic consumption in China will begin to recover, and as that happens, many of these domestic names are well positioned to benefit.
Valuations are also extremely compelling—many of these companies are trading at less than 10 times earnings, which is more than twice as cheap as their U.S. counterparts and about 50% cheaper than European peers. So we do see meaningful value in Chinese equities from a medium- to long-term perspective. In the short term, of course, volatility remains a concern, but strategically, we are positive on China’s onshore markets.
Southern Finance: Despite short-term headwinds, some argue that Chinese equities are significantly undervalued—especially with the rise of AI players like DeepSeek. What is your view of the current valuation landscape? Are you adjusting your China exposure amid renewed international investor interest?
Vincent Mortier: Yes, indeed. In our global equity portfolios, we have increased our exposure to China—specifically to onshore equities. We have not added to Chinese government bonds or debt, the fixed income side is not particularly attractive at the moment.
Chinese credit is more complex—there are selective opportunities we find attractive, but it can be volatile. Overall, we prefer equities, where we see stronger value and better upside potential.
Strategically, we’re now allocating to China equities above benchmark levels—though to be fair, those benchmarks are currently quite underweight China, which we believe is a mistake. The way the indices are constructed doesn’t adequately reflect the scale and dynamism of China’s economy, which is the second largest in the world.
You mentioned DeepSeek, which is a good example. Right now, there are around 50 companies in China pursuing similar AI developments, so this is not just a niche—it’s quickly becoming mainstream. And importantly, the benefits of AI won’t just be captured by a few chipmakers or software firms. The entire economy stands to benefit, across sectors. That’s why we continue to favor the broader market, where we believe the gains from innovation will be more evenly distributed.
