What assets matter when markets are volatile

Marketing Communication

Investment involves risks. For more information, please refer to the Risk section below.

When the news is awash with images of traders holding their heads in despair, it can be difficult to keep a positive – or even balanced – perspective.

Yet market turbulence doesn’t have to mean paralysis or panic selling. The challenge is to understand how different types of assets behave during periods of instability and ask yourself how it aligns with your own attitude to risk.

Managing volatility¹

Volatility refers to the rate at which markets move up or down. During periods of economic stress – whether that is geopolitical conflicts, interest rate hikes or inflation scares – volatility tends to spike.

Trump’s recent tariff announcements triggered shockwaves across the global economy, leading to significant volatility. During unpredictable times like this, investors might want a diverse mix of assets to potentially cushion against sharp market declines.²

Cash

While cash doesn’t typically generate returns in the same way that stocks or bonds can, its stability becomes very attractive when other assets are wavering.

Similarly low risk investments such as treasury bills or traditional money market funds (which invest in short-term bonds) may not offer any capital guarantee but tend to experience lower market fluctuations, allowing you to move money back into undervalued assets such as stocks when the dust settles.³

Fixed income

Fixed income investments or bonds can provide regular interest payments and should typically return the principal amount at the end of the term.⁴ Government bonds can sometimes stabilise your portfolio, as they are typically less sensitive to market fluctuations.⁵

That being said, it’s important to remember that not all bonds behave the same. When interest rates rise, bond prices tend to fall, potentially leading to losses in the value of your investment. We even saw certain bond prices unexpectedly fall in the wake of recent market turmoil. In each instance it’s important to consider how long you plan to invest for and the financial strength of the bond issuer.

Equities

Equities or stocks allow you to own a slice of a company and can consequently offer substantial growth potential if the company performs well. However, during turbulent times, company stocks could decline sharply, as we experienced during the recent period of trade tensions. This of course depends on where they are located, the type of sector they operate in, and their overall “health bill”.

The key question to ask yourself is how long you plan to invest. If you have a long-term investment horizon and can tolerate short-term fluctuations, maintaining or increasing exposure to equities might pay off, especially if you buy at lower prices during a downturn.⁶

While companies tied to economic performance – such as technology, luxury goods or travel stocks – tend to underperform in uncertain times, “defensive” sectors like utilities, industrials, telecommunication and healthcare can often be more resilient.⁷

Commodities

Commodities, including oil, coffee or gold, can often move independently of stocks and bonds, making them a valuable tool for a diverse portfolio.⁸ During the recent period of geopolitical unrest, gold’s value surged but commodity markets can also be quite volatile due to supply and demand factors.

Reassessing your risk tolerance

When the global economy is struck with uncertainty, it’s always a good time to reassess your risk tolerance. Are your investment goals still aligned with your current asset allocation?

By understanding the behaviour of different asset classes and aligning them with your risk profile, you can navigate market turbulence with confidence.⁹

Selected investment ideas for equity and bond ETFs

(1) In addition to the costs of fund management, the management fees also cover other administrative and operational costs of the fund. Further information on the costs incurred by investing in the fund can be found in the Key Information Document (KID). Trading ETFs may incur transaction costs and fees.

^* Volatility measures the amplitude of price variations in a financial asset over a given period. The greater the price variation – on both upside and downside – over a shorter timescale, the greater the volatility. The historical volatility of a financial asset can be calculated taking the annualised Standard Deviation of its return during a defined period.

¹ Volatility measures the amplitude of price variations in a financial asset over a given period. The greater the price variation – on both upside and downside – over a shorter timescale, the greater the volatility. The historical volatility of a financial asset can be calculated taking the annualised Standard Deviation of its return during a defined period.

² Diversification does not guarantee a profit or protect against a loss.

³ Past performance is not a reliable indicator of the future ones.

⁴ Investment involved risks. For more information, please refer to the Risk section below.

⁵ Diversification does not guarantee a profit or protect against a loss.

⁶ Investment involved risks. For more information, please refer to the Risk section below.

⁷ Investment involved risks. For more information, please refer to the Risk section below.

⁸ Diversification does not guarantee a profit or protect against a loss.

⁹ Investment involved risks. For more information, please refer to the Risk section below.

Key Risks

It is important for potential investors to evaluate the risks described below and in the fund’s Key Information Document (“KID”) and prospectus available on our website www.amundietf.com.

CAPITAL AT RISK - ETFs are tracking instruments. Their risk profile is similar to a direct investment in the underlying index. Investors’ capital is fully at risk and investors may not get back the amount originally invested.

UNDERLYING RISK - The underlying index of an ETF may be complex and volatile. For example, ETFs exposed to Emerging Markets carry a greater risk of potential loss than investment in Developed Markets as they are exposed to a wide range of unpredictable Emerging Market risks.

REPLICATION RISK - The fund’s objectives might not be reached due to unexpected events on the underlying markets which will impact the index calculation and the efficient fund replication.

COUNTERPARTY RISK - Investors are exposed to risks resulting from the use of an OTC swap (over-the-counter) or securities lending with the respective counterparty(-ies). Counterparty(-ies) are credit institution(s) whose name(s) can be found on the fund’s website amundietf.com. In line with the UCITS guidelines, the exposure to the counterparty cannot exceed 10% of the total assets of the fund.

CURRENCY RISK – An ETF may be exposed to currency risk if the ETF is denominated in a currency different to that of the underlying index securities it is tracking. This means that exchange rate fluctuations could have a negative or positive effect on returns.

LIQUIDITY RISK – There is a risk associated with the markets to which the ETF is exposed. The price and the value of investments are linked to the liquidity risk of the underlying index components. Investments can go up or down. In addition, on the secondary market liquidity is provided by registered market makers on the respective stock exchange where the ETF is listed. On exchange, liquidity may be limited as a result of a suspension in the underlying market represented by the underlying index tracked by the ETF; a failure in the systems of one of the relevant stock exchanges, or other market-maker systems; or an abnormal trading situation or event.

VOLATILITY RISK – The ETF is exposed to changes in the volatility patterns of the underlying index relevant markets. The ETF value can change rapidly and unpredictably, and potentially move in a large magnitude, up or down.

CONCENTRATION RISK – Thematic ETFs select stocks or bonds for their portfolio from the original benchmark index. Where selection rules are extensive, it can lead to a more concentrated portfolio where risk is spread over fewer stocks than the original benchmark.

CREDIT WORTHINESS – The investors are exposed to the creditworthiness of the Issuer.

Past performance is not a guarantee or indication of future results.

IMPORTANT INFORMATION

This information is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities or services in the United States or in any of its territories or possessions subject to its jurisdiction to or for the benefit of any U.S. Person (as defined in the prospectus of the Funds or in the legal mentions section on www.amundi.com and www.amundietf.com. The Funds have not been registered in the United States under the Investment Company Act of 1940 and units/shares of the Funds are not registered in the United States under the Securities Act of 1933.

This material reflects the views and opinions of the individual authors at this date and in no way the official position or advices of any kind of these authors or of Amundi Asset Management nor any of its subsidiaries and thus does not engage the responsibility of Amundi Asset Management nor any of its subsidiaries nor of any of its officers or employees. This research is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It is explicitly stated that this document has not been prepared by reference to the regulatory requirements that seek to promote independent financial analysis. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Neither Amundi Asset Management nor any of its subsidiaries accept liability, whether direct or indirect, that may result from using any information contained in this document or from any decision taken the basis of the information contained in this document. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice. Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients and principal trading desks that reflect opinions that are contrary to the opinions expressed in this research. Our asset management area, principal trading desks and investing businesses may make investment decisions that are inconsistent with the recommendations or views expressed in this research.

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Amundi UCITS ETFs are passively-managed index-tracking funds. The Funds are French or, Luxembourg open ended mutual investment funds respectively approved by the French Autorité des Marchés Financiers or the Luxembourg Commission de Surveillance du Secteur Financier, and authorised for marketing of their units or shares in various European countries (the Marketing Countries) pursuant to the article 93 of the 2009/65/EC Directive.

The Funds can be French Fonds Communs de Placement (FCPs) and also be sub-funds of the following umbrella structures:

- Amundi Index Solutions, Luxembourg SICAV, RCS B206810, located 5, allée Scheffer, L-2520, managed by Amundi Luxembourg S.A.

- Multi Units France, French SICAV, RCS 441 298 163, located 91-93, boulevard Pasteur, 75015 Paris, France and Lyxor Index Fund, Luxembourg SICAV, RCS B117500, located 9, rue de Bitbourg, L-1273 Luxembourg, and both managed by Amundi Asset Management located 91-93, boulevard Pasteur, 75015 Paris

- Multi Units Luxembourg, RCS B115129, Luxembourg SICAV located 9, rue de Bitbourg, L-1273 Luxembourg, managed by Amundi Luxembourg S.A. located 5, allée Scheffer, L-2520 Luxembourg

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Information reputed exact as of 01/07/2025.

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