This article first appeared in Capital, The Edge Malaysia Weekly on July 20, 2026 - July 26, 2026

WHILE investors may be tempted to retreat to cash, given the geopolitical conflicts in Ukraine and Iran, tariff uncertainty and volatile oil prices, Amundi Investment Institute head of global macroeconomics and emerging markets strategy Alessia Berardi says they should stay invested but maintain a diversified portfolio to spread out the risks.

In an exclusive interview in Kuala Lumpur, Berardi says: “We continue to remain risk-on [and] are constructive on risky assets. The economic outlook has been quite resilient. Growth has been subdued, but we haven’t had any kind of outright recessionary outlooks even after the Covid-19 pandemic. Economic activity has remained relatively stable, while recession fears have not materialised. If you look at the [equity] markets, they have remained quite bullish.”

By “risky assets”, Berardi means emerging-market (EM) debt and corporate credit. These offer higher yields than safe government bonds but carry credit risk and spread volatility, making them “risky” despite being bonds.

She says that amid geopolitical, inflation and fiscal risks, investors can strengthen portfolio hedges to better navigate the current environment. She adds that Amundi has been increasing its positioning across asset classes.

Berardi highlights gold for its importance despite its pullback from recent highs. “The geopolitical risk is not really diminishing. Gold continues to be an important hedge.”

Amundi also revised its assumptions for oil prices after the US and Iran agreed to end hostilities. At the time of the interview, the US and Iran had just signed the Islamabad Memorandum on June 17 aimed at ending the war against the latter, but tensions have since flared over the control of the Strait of Hormuz. US President Donald Trump declared on July 7 that the ceasefire was over.

Berardi sees the June 17 agreement as fragile and maintains a cautious view on oil prices. Amundi has ascribed a geopolitical premium to its outlook, expecting oil to average between US$80 and US$85 a barrel in the near future. Brent crude futures had climbed 1.7% to US$84.72 a barrel last Tuesday after Trump said the US was reinstating its blockade of Iranian shipping in the Gulf and would collect a 20% fee on cargo traversing the Strait of Hormuz.

“In an environment where there is high inflation [and] central banks are shifting towards a more hawkish stance, a clear integration call is not really compelling now,” Berardi says. “In the core markets, we are not very constructive on the US [for now]. In fact, the theme of diversifying out of the US is returning.

“Now that we have a [ceasefire] deal, maybe there is less appetite for safe assets, for the dollar and so on. Which is why, for equities, we continue to like emerging markets.

“If you’re going to remain invested, and if it is in the artificial intelligence (AI) sector, you can broaden the opportunities that are related by going upstream and downstream, [exposing your investments] to other subsegments and geographies. This makes your investment more interesting.”

Rather than taking longer-duration positions in anticipation of aggressive interest rate cuts, Amundi continues to favour carry trades in the current economic environment, Berardi says. In simple terms, a carry trade is an investment strategy in which one borrow funds at a low interest rate to invest in an asset with a potentially higher rate of return, profiting from the net interest differential.

The strategy reflects the asset manager’s view that inflation is likely to remain structurally higher than before the pandemic, while central banks have become more cautious about easing monetary policy. That makes locking in attractive yields more compelling than extending portfolio duration.

“We are not very constructive on the US but, for Europe, we tend to like the short term part of the [yield] curve,” she says. “So, there are opportunities that are very much related to carry, maybe because the markets have been anticipating a bolder action by the central banks.”

As a result, Amundi continues to favour selected EM debt where yields remain attractive. It is less constructive on longer-dated government bonds, preferring the shorter end of the yield curve where investors can earn attractive income while limiting interest-rate risk.

“On the equity side, we continue to like emerging markets, Japan or Europe. We like small and medium technology players as well as utility and industrial sectors related to the adoption of AI,” Berardi says.

She adds that Asia has proven more resilient than many investors expected and Asian markets have been just as crowded as the US markets.

While Big Tech names such as Nvidia Corp, Microsoft Corp and Apple Inc have been driving the Nasdaq Composite Index over the last few years, in Asia, companies such as Samsung Electronics Co Ltd, Taiwan Semiconductor Manufacturing Co Ltd and SK Hynix Inc, along with other AI-related firms in Taiwan and South Korea, have similarly accounted for a large share of the region’s gains, highlighting how concentrated Asian equity markets have become.

Berardi says while Asian equities have delivered strong returns this year, investors should not assume that buying the region automatically provides diversification away from the US.

Much like US equities, Asian markets are concentrated in a handful of countries and companies, particularly in South Korea and Taiwan, whose technology sectors are closely tied to US demand and the AI investment cycle.

“South Korea and Taiwan are not really a diversification out of the US,” she points out.

Instead, Berardi emphasises broadening exposure to the AI theme by investing further down the value chain and across different geographies, including Europe and India, where companies in power infrastructure, industrials and software stand to benefit from wider AI adoption.

On the fixed-income side, she says Asia may hold less appeal because bond yields are generally lower than those in Latin America or Eastern Europe, where carry opportunities are more attractive.

She sees value emerging,however, in several Asian currencies. The rupee, in particular, has weakened because of higher oil prices and concerns over India’s twin deficits (fiscal and current accounts), but easing energy prices, central bank support and attractive valuations are improving its outlook, she explains.

Berardi is more cautious on Indonesia, where fiscal policy uncertainty continues to weigh on sentiment despite measures to support the currency.

While demand for the greenback has gradually softened and central banks have diversified reserves into assets such as gold, Berardi believes there is still no credible alternative to the world’s reserve currency.

Nevertheless, she expects the US dollar to weaken gradually, provided the Federal Reserve does not embark on another aggressive tightening cycle.

In an environment defined by persistent geopolitical uncertainty and shifts in inflationary pressure, the investment objective is not merely to avoid risks, but to build portfolios capable of weathering uncertainty.

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