- Allianz Global Investors present its Houseview for Q3 2025
- “FOGI” – fear of going in – that has taken hold among institutional investors amid erratic policymaking and volatility in US markets might be replaced by FOMO – fear of missing out.
- Amid concerns over policymaking and rising debt levels, global investors are questioning the future of the US dollar and US Treasuries as safe havens.
- Increased fiscal spending in Europe is set to benefit leading local players in sectors such as cybersecurity, defence/defence tech and AI.
Will FOGI – the fear of going in that has taken hold among institutional investors amid erratic policymaking and volatility in US markets be replaced by “FOMO” – fear of missing out – over the next quarter as an easing of trade tensions and rebounding financial markets prompt a change of heart later in the year? According to AllianzGI, investors are considering their next move. Many factors that made the US a uniquely successful business environment remain intact – such as the typically high return on capital of US companies, its leadership in artificial intelligence (AI), and favourable demographics. But the current weighting to the US in global indices may be too high: the premium applied to US stocks may be warranted in only the best-performing sectors. Moreover, amid concerns over policymaking and rising debt levels, global investors are also questioning the future of the US dollar and US Treasuries as safe havens. Meanwhile, increased fiscal spending in Europe is set to benefit leading local players in sectors such as cybersecurity, defence and defence tech, and AI.
Equities
After a selloff followed by recovery, US stocks remain highly priced by historical standards. But there are plenty of opportunities elsewhere.
Virginie Maisonneuve, CIO Equities remarks: “In Europe, a continued focus on “sovereignty” will provide tailwinds as governments boost investments in infrastructure and strategic industries. We believe the earnings growth differential with the US will narrow in 2026. In Asia, the move from language-based AI to multi-modal models will be a key driver of tech growth and innovation, especially in China. In Japan, reflation and reform in corporate governance are driving markets, which may also benefit from a safe-haven effect as money is expected to rotate out of the US. India’s growth is set to reaccelerate, buoyed by favourable fiscal and monetary tailwinds. Over the long term, demographics and productivity gains should continue to favour India. In the tech space, in addition to the AI theme – adopters vs enablers – we believe that as cyclical pressures ease and structural demand accelerates, the broader semiconductors sector will be an area of regained interest”.
Fixed income:
AllianzGI expects downward pressure on the US dollar and a continued steepening in the US yield curve. An allocation to local currency bonds could continue to benefit from a decline in the dollar.
Michael Krautzberger, CIO Public Markets comments: “Bond market volatility could remain high, so we prefer to trade tactically around our core views in yield curves and our long headline duration bias. We see value in long 30-year Gilts versus US Treasuries. We think the macro and policy backdrop also favours peripheral euro sovereign spreads over core markets. In investment grade credit, pricing is modestly rich, but corporate fundamentals remain strong and technicals are supportive. We retain a moderate overweight with a focus on higher quality and non-cyclical names. We think high yield spreads offer limited compensation for any step up in defaults. Rather than chase the market, we focus on security selection and stay slightly underweight. In emerging markets, we favour local currency bonds, especially where central banks have room to cut rates, such as Indonesia. We also like South African local rates. We think the US dollar faces cyclical and structural headwinds and favour short positions versus the South Korean won, Singapore dollar and Brazilian real, among others”.
Multi Asset
Greg Hirt, CIO Multi-Asset comments: “As multi asset investors, we are cautiously optimistic on equities, helped by supportive momentum, but with strong regional preferences. While equities could continue to profit from technical support in the short term, we expect US equities to reach a secular top, while other markets may outperform. Our pick is euro zone equities, aided by improving sentiment, supportive central bank policy, and growing investor inflows. The euro zone is also our preferred choice for sovereign bonds due to soft inflation data and safe-haven flows, though our conviction has moderated. Rising fiscal concerns and weak auctions mean we are more cautious about US Treasuries. EM debt should increasingly profit from past years of fiscal and monetary discipline.
“We stay positive on the euro and the Japanese yen, benefiting from dollar weakness and supportive fundamentals. The US dollar’s outlook is clouded by challenges to US exceptionalism and the rising debt burden overseas. Gold continues to shine amid an uncertain global outlook, bolstered by strong buying from central banks, while oil remains under pressure as concerns about excessive supply weigh on prices. Copper stays range-bound but additional tariffs on the metal could push up prices.”
Private markets
Relative to public markets, private markets performance has proven more stable (less volatile) in the past periods of market turmoil, showcasing how the addition of private markets in the asset allocation can help stabilise a portfolio in such times.
While the growth outlook is uncertain, adding defensive assets such as floating-rate private debt and infrastructure equity should help safeguard portfolios if inflation is kept under control. If inflation rises significantly, real assets are expected to benefit. Secondaries (stakes in existing private credit funds) may also further evolve as a compelling defensive play amid overall uncertainty, lack of distributions in the broader market, and drawdowns in public markets.
Edouard Jozan, Head of Private Markets, comments : “Fast-growing semi-liquid private market products can be a good way to tap into private markets – especially for investors seeking an initial foothold as they offer a fast build-up. They can also help existing investors fine-tune their allocation.”
