The current phase of “controlled disorder”, further exacerbated by the conflict in the Middle East centred on Iran, has heightened market volatility and uncertainty.
While the precise macroeconomic consequences remain unclear, these events are likely to reinforce the demand for predictability as investors seek instruments that enhance portfolio resilience. Fixed income provides regular income streams which can be well diversified across geographies and sectors to cushion the effects of low probability, high impact events. Furthermore, active portfolios managed by teams with demonstrated skill in navigating uncertainty have a potential to harness volatility to investors’ advantage.
Active, flexible fixed income strategies should therefore be central to portfolio positioning, thanks to their ability to adjust duration, move up in credit quality and uncover pockets of value while helping to mitigate risk.
Lastly, as all-in yields remain near 15-year highs, fixed income currently offers compelling future return potential.
Central banks' rates and forecasts
Source: Amundi Investment Institute as of 25 March 2026. CB Forecasts are by Amundi Investment Institute and are as of 25 March 2026. Fed: Federal Reserve, ECB: European Central Bank, BoE: Bank of England, BoJ: Bank of Japan. For the Federal Reserve, current rate refers to the upper bound of the target range. For the BoJ, current rate refers to the upper bound of the target range. For the ECB, current rate refers to the deposit facility.
A stagflationary impulse - weaker growth alongside higher inflation, driven by a sustained period of elevated oil and gas prices - is now perceived as a material risk.
The impact of higher energy prices will be uneven across regions: the US economy is expected to remain relatively resilient, widening its growth premium versus other regions, while Europe is likely to be more vulnerable to an oil-driven inflation impulse, although the shock may accelerate policy and investment trends towards energy autonomy and the green transition.
For emerging markets, the situation will be heterogeneous: rising producer prices in large economies such as China could add to global inflationary pressures, while oil-producing economies and regions with favourable fiscal positions, for example parts of Latin America, may prove relatively resilient.
This creates a policy dilemma for central banks: raising rates risks further slowing growth, but keeping rates too low could allow inflationary pressures to persist.
Looking at developed markets, we expect the Federal Reserve to remain on hold this year. The European Central Bank is also likely to keep rates unchanged this year, with a minor risk of a hike. Overall, in our central scenario we do not expect rate cuts in 2026 from major DM central banks, as they navigate elevated inflation and weak growth.
Central banks in risk management mode; vigilant on inflation but reluctant to rush into automatic tightening
FED | “On hold” / wait-and-see stance is consistent with our inflation profile, but it would likely be seen as a major failure by Trump and could put pressure on the new governor. | ||
ECB | On hold in 2026 and early 2027 amid policy dilemma. | ||
BoE | Paused in 2026 and the start of 2027 amid policy uncertainty. | ||
BoJ | Unchanged hiking path. | ||
Source: Amundi Investment Institute as of 25 March 2026. CB Forecasts are by Amundi Investment Institute and are as of 25 March 2026. Fed: Federal Reserve, ECB: European Central Bank, BoE: Bank of England, BoJ: Bank of Japan. For the Federal Reserve, current rate refers to the upper bound of the target range.
Solutions that enhance portfolio stability are becoming increasingly appealing in a volatile market. We believe an active approach to fixed income could represent an optimal solution in the current environment, as uncertainty is likely to persist and significant regional and idiosyncratic divergences are expected to continue to unfold.
We advocate high-quality strategies that adopt a disciplined yet flexible approach, dynamically adjusting duration and positions to navigate rapid shifts in inflation and policy expectations, while also adding exposures when dislocations present attractive risk-adjusted return opportunities.
At the same time we emphasise diversification* across credit quality, sectors, geographies and currencies to mitigate idiosyncratic and commodity-driven risks.
Amundi is one of the industry leaders in fixed income, with AuM of over €1 trillion (as of 31 December 2025).
Over the past 20 years we have developed a comprehensive range of fixed income investment products, encompassing fundamental, rule based and active approaches to buy and maintain strategies.
The team’s strong skill set and broad expertise seek to identify the best opportunities while continually evolving the ways in which potential returns are sourced.
At Amundi, we are well placed to help you reinforce your portfolio and benefit from the opportunities presented by these significant macroeconomic changes.
The current geopolitical shock strengthens the case for a strategic allocation to fixed income. Its capacity to deliver regular income and to reduce portfolio volatility — especially when managed actively and combined with robust diversification* — makes it an attractive solution for investors relying on experienced managers in an environment of heightened uncertainty.
Article published on 1 April 2026
*Diversification does not guarantee a profit or protect against a loss.
Marketing material for professional investors only
Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of 1 April 2026. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management S.A.S. and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results.
Date of first use: 1 April 2026
Doc ID: 5323084
