Amundi - Cross Asset Investment Strategy #12

Executive Summary

Insights
- Asset Allocation: Amundi's investment strategies - Page 4 
Asset allocation must draw on current divergences and decoupling, the only way to generate returns in a low interest rate environment 
> Focus: > Further cut in the ECB's deposit rate: was it really necessary?
- Risk Factors - Page 9
- Macroeconomic picture - Page 12
- Macroeconomic and financial forecasts - Page 13

BRICS
1. Is India the next China? - Page 14
Because of its different insitutional setup, India wouldn't be able to adopt a model similar to China's and it would be hard-pressed to repeat China's miracle. We believe India would really stand out with potential strong economic growth from improving labor porductivity, capital productivity and total factor productivity. 

2. Financial Cold War in 2016: cooperation with China is the only way for America (and Europe) - Page 17
Sterilised stabilisation of the yuan is the first step to start solving global imbalances in 2016, as it requires success on both fronts facing China: domestic stabilisation and US-China coopoeration 

3. The resignation or the impeachment of Dilma Rousseff: the only substitute to Brazilian debt monetization? - Page 10
In the October's edition, we evoked the possibility of a monetization of the debt in Brazil. Today, the situation seems enough grabe so that the President of the Lower House, who refused to now the request of Dilma Rousseff's impeachment, finally accepts it. 
> Focus: > A long procedure with an uncertain outcome

Forex
4. Dollar: the big difference compared to the 2004-2006 cycle - Page 21
The dollar has risen sharply since mid-2014, whereas it fell signifcantly during the precious Fed-fund tightening cycle (2004-2006). This difference can be explined by the fact that the trends o nthe commodities market are polar opposites. 

Credit
5.  EUR credit valuations and relative value vs other risky assets - Page 22
"BB- and BBB-rated corporate bonds account for 50% of remaining yields in the 1-5 yr, while making up just 10% of outstanding debt" 

6. The huge increase of US corporate debt makes the Fed's game more complicated - Page 24
Today, the Fed faces an impossible situation. On the one hand, the US economic recovery is still fragile, in a context of floval growth weakened by the end of the commodities supercycle. On the other hand, the virtual decade of ultra-accomodating monetary policy has caused colleteral damage that can no longer be ignored
> Focus: > US businesses have also been very active on the euro bond market

Equity markets
7. Seemingly mediocre, Q3 results actually confirm porjections of an upturn in 2016 EPS for the eurozone  - Page 26
As valuations in Europe have tightened significantly, the continued rise of the equity markets will be increasingly detemrined by profit growth. Against this backdrop, a review of the 2015 Q3 earnings seasons on both sides of the Atlantic could hold lessons for the future. Ultimately, although Q3 earnings in Europe were fairly mediocre, they were heavily penalised by the energy sector. As this effect is expected to dissipate, 2016 earning should recover, particularly in the eurozone

Sectorial highlights
8. Final TLAC rules for global banks - Page 29
TLAS rules are to be imposed to 30 banking group with global systemic importance (so called G-SIBs)
> Focus: > Ramp-up of TLAC requirement

9. Paradigm shift in the defence sector - Page 33
In the last few years we have entered an era of asymmetric warfare, which has several implications: a multitue of moving targets that are both organised and militarised.

10. Mobile users are forcing retailers to adopt a new business approach - Page 35
Mobile is now a key channel for winning over and keeping clients. In the apparel sector, multi-channel and specialist sites aggregating several brands offer the best business models. However, the challenges of the internet are real for e-commerce pure players, which is leading to a wave of consolidation.