Emerging market equities are well-positioned to benefit from structural shifts in countries adapting to global economic realignments that will outlast the current U.S. administration’s tenure, noted a report by the Amundi Investment Institute.
Indeed, Amundi’s 2025 mid-year outlook noted that, despite the current U.S. tariff regime, “fading U.S. economic exceptionalism and a weakening U.S. dollar” is enhancing attractiveness of emerging markets. The pending sectoral tariffs present risks but also fuels the development of localized supply chains that benefit emerging markets, it said.
While the institute noted investors should remain cautious, it pointed out the global realignment afoot remains positive for credit markets as the danger of corporate profits declining sharply is receding. Amundi’s estimate for global growth for 2025 and 2026 are 2.9% and 2.8%, respectively. Notably, it said expectations for gross domestic product growth over the next two years for emerging markets exceeds that of developed markets (3.9% compared to 1.3%, respectively) — though the growth gap between emerging and developed markets is expected to stabilize slightly above historical average.
India and ASEAN countries are emerging as key beneficiaries of these structural shifts and remain major drivers of growth. “We estimate 2025 and 2026 GDP growth at 6.6% and 6.4% for India, and at 4.3% and 3.9% for China.”
Overall, the report added, emerging markets are expected to benefit from an overall positive growth and inflation path, easing monetary policies and a growing middle class.
“Despite unpredictable policymaking, business resilience, and new rerouting trends, the expected rate cuts from central banks will create opportunities in global equities,” said Monica Defend, head of the Amundi Investment Institute, in a press release. “We are focusing on themes such as European defense spending, U.S. deregulation, corporate governance reform in Japan, and the ‘Make in India’ initiative.”
Meanwhile, the report found disinflation persists in Europe, while inflation risk is on the rise in the U.S. The institute projected that the tariffs will do the opposite of their main intention, leading the U.S. economy to decelerate to 1.6% in 2025-2026, down from nearly 3% in 2023-24.
“This is likely to lead to economic losses and a temporary resurgence in inflation, which, in turn, could hit corporate margins,” said the report, noting fiscal measures and deregulation should provide only limited relief.
Amundi’s outlook for Europe was more favorable, as the Bloc continues its pivot to new trading alliances. This shift, coupled with reduced trade tensions, lower interest rates, and a stronger Euro is expected to fuel gradual pick-up in domestic demand and private credit. Expected rate cuts, as well as its greater stability, upcoming reforms and investments and a stronger Euro are all expected to further enhance the region’s investment outlook.
“Government bond markets are rattled by the threat of higher debt and rising inflation fears, keeping volatility high,” said Vincent Mortier, group chief investment officer of Amundi, in the release. “Investors are likely to demand greater compensation for long-dated bonds, making yields appealing. The name of the game will be diversifying away from the U.S. and into European and emerging market bonds.”
