Published: Monday July 24 2017Most people say they want to keep their personal information private, according to Professor Leslie John of Harvard Business School, but in practice they will reveal it for often trivial reasons or to win the approval of others.Privacy is an issue of great sensitivity in a digital age. Many people go to considerable lengths to protect their personal information from online access by strangers, commercial enterprises and public bodies. And users of most social media have to sign up to complex agreements setting out their rights to privacy and how the companies can use their personal information.Yet very few people read the lengthy privacy statements before signing away rights to the highly confidential information they provide online. And in practice, it canRead More »
Articles by Perspectives Pictet
Published: Friday July 21 2017In the battle to protect the security of digital information, a Swiss company has used quantum mechanics to develop a new form of cryptography which makes decoding data impossible – even as computers become much faster.The increasing processing power of computers is making it easier for hackers to decipher encrypted information by finding the keys at the heart of traditional coding techniques. That task will become much easier when quantum computers arrive, hugely accelerating processing speeds and making it possible to break codes very quickly.However, the quantum mechanics science behind the new generation of super-fast computers has already generated a new form of cryptography which is impossible to decode – not least because any attempt to interceptRead More »
Published: Monday July 17 2017Israeli entrepreneur Oren Yakobovich has created Videre est Credere, a human rights organisation which helps communities to film and document the violence and corruption they experience, and distributes the material to create change.From his childhood, Oren Yakobovich had always wanted to join the Israeli defence forces. His parents had immigrated to Israel in 1967, giving birth to him a few years later and bringing him up in a very patriotic house which believed that the country belonged to the Jewish people. At 18, he joined up, first as a pilot and then becoming an infantry officer serving mainly on the West Bank.But surprised at what he saw there, he began to understand the Palestinian cause for the first time and what Israel was doing to the PalestinianRead More »
Published: 12th July 2017Download issue:English /Français /Deutsch /Español /ItalianoRisk assets showed a considerable loss of momentum in the second quarter. Annualised rises of over 50% on the S&P500 for much of the first quarter declined to 5% in the second. The reason was the fading of any belief in the reflation trade that the election of Donald Trump was meant to foster via tax cuts and infrastructure spending. There has also been a palpable loss of momentum in European markets as the boost provided by receding populism has faded.According to Pictet Wealth Management s (PWM) chief strategist, Christophe Donay, writing in the August-September issue of Perspectives, with valuations already high, equities could remain on pause for a while yet in the absence of some sort of newRead More »
Published: Monday July 10 2017Increasing concerns about potential cyber attacks on satellites, energy installations and defence systems call for more creative threat responses, according to an expert in international security at a leading UK think-tank.The enormous growth in the processing power of computers has put great connectivity in the hands of users, but it has also offered great opportunities for cyber criminals to exploit their vulnerabilities. This has raised concerns over the privacy of digital communications and the security of personal data held on computers.But a relatively new set of concerns is developing over the increasingly apparent links between cyber security and physical security in fields such as defence, the space industry and critical infrastructure. Dr PatriciaRead More »
Pictet Wealth Management’s latest positioning in fast-evolving markets.Asset allocationAs central bank support starts to be withdrawn, volatility could well rise.We are still slightly long equities, since fundamentals are supportive, but have bought put options on the S&P 500 to guard against downside risks. A rise in volatility will create opportunities for tactical trading and especially hedge funds.CommoditiesOil prices fell again in June, but now appear close to what we assess as the current equilibrium price (around USD44 per barrel).EquitiesThe slowdown in market momentum has occurred later in Europe than in the US, but margin for further outperformance by Europe may be shrinking.Until markets start pricing in 2018 earnings later this year, there is a good chance that equities willRead More »
Published: Thursday July 06 2017Economic cycles have resynchronised, but this looks to be only a temporary phenomenon. Christophe Donay, Head of Asset Allocation and Macro Research at Pictet Wealth Management, discusses the implications for equity markets.
Published: Monday July 03 2017Stocks in businesses that provide security solutions in a wide variety of market sectors are proving to be an attractive investment theme with growth fuelled by innovation, urbanisation and regulation.When Pictet Asset Management launched the Security Fund ten years ago, the security market was not seen as a strong or growing one. But today the security industry is growing very fast, and expanding to cover many different market sectors.Security permeates our lives, from dawn to dusk. When we rise in the morning, we use electricity, gas and water to heat our homes, shower and make breakfast – relying on utilities whose operations are securely protected. We travel to work by car or public transport, using equipment secured for our safety and under the watchfulRead More »
Published: Monday June 26 2017Terrorist organisations intent on destroying their enemies are using increasingly sophisticated cyber attacks to damage critical infrastructure and kill large numbers of people, according to a former Israeli security chief.Governments and large organisations trying to protect themselves from large-scale cyber attacks face two primary challenges in the modern era, according to Doron Bergerbest-Eilon, the former Head of the Protection and Security Division of the Israel Security Agency and Israel’s most senior ranking security official.The first is the constantly evolving nature of the terrorist threat. In the past, terrorists were primarily motivated politically, by the aim of ousting governments and installing new regimes. They were not looking to inflictRead More »
Published: 21st June 2017Download issue:English /FrançaisWe live in a digital world where security threats are proliferating and becoming more sophisticated. The Summer 2017 issue of Pictet Report, examines the nature of these threats and various aspects of online security.On a personal level, people find hackers trying to access their personal information online for criminal purposes. Commercial organisations and public bodies face similar attacks, while terrorists and hostile governments use cyber attacks to further their political ambitions. In this issue of Pictet Report, two international security experts set out the fast-growing challenges posed by cyber attacks and call for more creative threat responses to avoid the destruction of critical infrastructure and the deaths of largeRead More »
Pictet Wealth Management’s latest positioning in fast-evolving markets.Asset allocationMarkets have continued to rally on strong fundamentals. It has been important to stay invested, and we continue to favour DM equities. However, markets appear unduly complacent, and we have taken advantage of current low volatility to scale back our risk exposure.We reduced our equity overweight in June by selling part of our Global Defensives equities, and also cut most of our US high yield position. We invested the proceeds in either corporate/aggregate short-term bonds (1-3 years) or in USD cash.Emerging market assets continue to perform well, but the sharp sell-off prompted by the scandal around Temer in Brazil is a reminder of the risks. We still prefer to play EM through DM, but EM local currencyRead More »
Published: Tuesday June 13 2017Cesar Perez Ruiz, Chief Investment Officer at Pictet Wealth Management, discusses the synchronised global recovery, political and geopolitical risks, and the need to protect portfolios against market complacency.
Published: Wednesday May 31 2017The fourth edition of the Latam Family Office Master Class took place in Nassau from the 3rd to the 5th of April 2017, with more than 65 guests attending. This year the focus was around family governance, geopolitics, technology and alternative investments. Among the speakers, we had the pleasure of welcoming former Governor of Florida, Jeb Bush; Argentina’s one-time Minister of Economy, Alfonso Prat-Gay; Yuri Van Geest, Founder of Singularity University, Netherlands and Joseph J.Sitt, CEO of Thor Equities.
Published: 24th May 2017Download issue:English /Français /Deutsch /Español /ItalianoWith the election of Emmanuel Macron as French president, the tide of populism may have been stemmed for the moment in western Europe. Has Europe’s political class found the formula for dealing with the phenomenon? “I wouldn’t bet my investment career on it,” answers Pictet Wealth Management’s (PWM) chief investment manager, Cesar Perez Ruiz, in the June-July issue of ‘Perspectives’. Signs of ‘peak populism’ should allow investors to focus on the improving growth environment—but none of the factors that gave rise to the populist explosion have gone away. “The next turn in the economic cycle could well tip the balance in a number of countries,” writes Perez Ruiz.The theme of the interaction between economics and politics is taken up PWM’s chief strategist, Christophe Donay. Having doused the flames of the financial crisis, central banks have begun to step away from expansionary monetary policies, which means, writes Donay, “there is now the tantalising possibility that economic policy will fill the void”. Donay argues that once the sugar rush provided by positive earnings surprises fades, “a further leg-up in risk assets may depend increasingly on fiscal and budgetary policy” and its success in putting the current cyclical recovery on a firmer footing.Read More »
Pictet Wealth Management’s latest positioning in fast-evolving markets. Asset AllocationMarkets are starting to revise their expectations for the Trump administration. We still see some prospect of a US fiscal stimulus, but it is likely to be later (not kicking in before 2018) and less ambitious than hoped.Improving economic performance and strong earnings growth support our positive stance on DM equities, despite high valuations. However, room for disappointment is limited.We expect core sovereign bond yields to rise as economic growth strengthens and inflation expectations pick up.Favourable economic fundamentals do not favour buying gold, but a call option on gold offers a way to hedge geopolitical risk.CurrenciesAlthough the US dollar’s up-cycle is mature, the greenback should remain strong in 2017.With hard Brexit still the most likely scenario and the UK economy starting to suffer, upside potential for sterling is likely limited.EquitiesEarnings growth has surprised positively and we see good momentum for 2018.Positive profit margin momentum in Europe supports our overweight in European equities.The strong performance of European equities also supports our view that it is better to play EM through DM.Fixed incomePeripheral euro area bond spreads could widen on anticipations of ECB tapering, as well as the approach of Italian elections in 2018.Read More »
Published: Tuesday May 02 2017Evidence that hard data is catching up on soft data continues to put wind in the sails of equity markets, which are also benefiting from strong earnings news. A revival of Trump’s tax plans could further help risk assets. But political and geopolitical risk has not entirely disappeared. Cesar Perez Ruiz, Pictet Wealth Management’s Chief Investment Officer, discusses the road ahead.
The Pictet Group is proud to present its Annual Review of activites for 2016, covering Pictet Wealth Management, Pictet Asset Management and Pictet Asset Services.We are pleased to introduce the Annual Review of the Pictet Group for 2016 — my first as Senior Partner. After I assumed the role on 1 July last year, I was asked if Pictet’s strategic direction would change. The Senior Partner is, by tradition, chair and primus inter pares of the board of partners, only assuming the position after a decade or two as a partner.The thrust of our strategy is therefore towards continuity, solidity and stability: the conditions in which Pictet’s entrepreneurial spirit will thrive. These principles are more vital than ever with so much corporate activity in the asset and wealth man- agement sector.We are by no means immune to the profound changes in the financial industry, in society and in the wider world. For example, automation and the digital revolution are changing how we commun- icate and work in ways that we could hardly have imagined. But, underpinned by our long-held values, I have no doubt that we have the talent, resources and services to adapt, and to exploit the opportunities ahead, to the enduring advantage of our clients.Read More »
While our central scenario discounts the possibility of Marine Le Pen becoming president, her presence in the second round of the presidential election is likely to create considerable nervousness for investors.Our main scenario, a win for a Europhile politician in the second round of the French presidential elections in May, could result in a small relief rally on markets. However, the National Front’s Marine Le Pen is seen as being one of the two candidates to go through from the first round next Sunday to the second round, causing unease on financial markets.Le Pen can probably only hope to win that second round if voter participation collapses. In the unlikely event that she does win, markets would be considerably shaken.On FX markets, the euro would likely fall by about 6% to 13% against the US dollar on a 1-month horizon, probably taking the EUR/USD below parity (barring a significant rise ahead of the elections).French equities are fully integrated in European stock markets (one-third of the Euro Stoxx and one-sixth of the Stoxx 600) and a Le Pen victory would create fears not just for France but for Europe as a whole. Short-term volatility levels are inflated, but investors have not hedged aggressively. As a result, depending on the extent of the currency move, a pull-back of between 5% and 15% is possible.Read More »
Shale oil has forced the conventional oil industry to reinvent itself. Companies have nevertheless demonstrated terrific powers of adaptation, helped by the high-tech nature of the oil industry.In a ‘lower-for-longer price’ environment, there are still attractive themes and equity stories to play, assuming prices remain broadly above USD45-50 per barrel. Valuations generally remain reasonable, especially on the back of the correction since the start of the year. The growth theme is clearly the shale oil story, where both producers and services companies look well positioned—whatever the oil price, shale oil producers will remain the relative winners. Among ‘the rest’ of the oil sector, the large integrated oil majors look the most attractive investment opportunity, albeit not a growth category but more a yield story.The shale oil industry was hit hard by the price slump of the past two years, but the survivors have shifted downwards on the cost curve, thanks to efficiencies and technological progress. Over the long term, we expect further efficiencies to be realised. As a result, US shale output may rise by close to 1m barrels per day (b/d) over the next few years, enough to meet the bulk of global demand growth (1.3m b/d). Across the industry, most companies are positioning for ‘lower-for-longer’ oil prices.High-risk exploration is now a story of the past.Read More »
Pictet Wealth Management’s latest positioning in fast-evolving markets. Asset allocationThe first quarter was exceptionally strong for risk assets, and the outlook remains good for developed market (DM) equities.We remain comfortable with our overweight in developed market equities, but it would be wise not to take too much risk in the coming quarter.EM assets may offer attractive opportunities on a tactical basis.CurrenciesThe US dollar probably has only limited further upside, absent a major boost to economic growth.The Swiss franc looks set to retain its safe-haven role.EquitiesThe reflation trade is proving resilient, supported by a good earnings growth outlook.Valuations for DM equities are well above long-run averages and leave little room for disappointment.Fixed incomeWe continue to favour high yield within fixed income.US Treasuries remain important as a protection asset.AlternativesOur focus remains on opportunistic managers with a long volatility profile. At the portfolio level, we aim to keep a low beta to equities and credit.We expect private equity to continue to display attractive returns.Read More »
Published: Tuesday March 28 2017Alexandre Tavazzi, Global Strategist at Pictet Wealth Management on factors that might hit market valuations.
Published: 28th March 2017Download issue:With President Trump’s plans to ‘reform and repeal’ Obamacare suffering a serious setback in Congress in March, attention is once again turning to the new administration’s plans for tax cuts and fiscal reform. The so-called ‘reflationary trade’, while in large part based on improving economic dynamics, also owes something to expectations that the new US administration will push through with other parts of its economic agenda. This means, writes Pictet Wealth Management’s (PWM) chief investment officer, Cesar Perez Ruiz, in the March-April issue of ‘Perspectives’, that there is potential for an increase in volatility , “especially if there is less than meets the eyes” in Trump’s economic plans. And just as doubts emerge about fiscal stimulus, the Fed has embarked on fiscal stimulus. “This could be an uncomfortable mix for certain assets,”according to Perez Ruiz.But the CIO maintains his faith in risk assets, including equities, as hard economic data catches up with upbeat forward indicators and the climate for the global economy brightens. Two more rate hikes this year after the quarter-point rise in March will have an impact, but should not derail the US’s prospects, but PWM’s chief economist, Bernard Lambert, is convinced they “will only occur if economic growth is strong enough to support them”.Read More »
Pictet Wealth Management’s latest positioning in fast-evolving markets.Asset allocationWe remain comfortable with our overweight position in developed-market (DM) equities and believe there are good reasons to be positive on Japanese equities,With volatility low and risks looming in the short term, this is a good time to add protection to portfolios. We have bought derivative protection on EUR high yield bonds and a call option on gold.Expecting yields on core sovereign bonds to rise further this year, we sold our German Bund positions in EUR and CHF grids in March.Equities in DM are likely to offer superior returns and less volatility than emerging-market (EM) in 2017. However, EM assets may offer attractive opportunities on a tactical basis.CommoditiesOur core scenario does not favour buying gold at present. However, while gold contains a significant opportunity cost, call options constitute a relatively cheap way to build some protection against more extreme risks.EquitiesEarnings growth is the key component in our expected returns for equity markets. Expectations have risen through the reporting season for Q4 2016, and earnings growth looks robust for all markets.Read More »
Published: 10th March 2017Download issue:The latest edition of Horizon is out, containing Pictet Wealth Management’s updated secular outlook and expected returns for the main asset classes over the next 10 years.Some of the highlights are as follows: Expected ReturnsEquities: below long-term average but still attractive. Our models suggest that global equities can be expected to post a 6% return in US dollars annually for the next 10 years. Such returns look attractive relative to long-term sovereign bonds, but are markedly lower than the 8.6% average long-term annual return of the S&P 500.Government bonds: the bonanza is over. It looks unlikely that bonds will post meaningful positive returns over the next few years. At best, according to our models, 10-year US sovereign bonds can be expected to return 1.2% on average per year over the next 10 years, while 10-year government bonds in the euro area, Switzerland and Japan will deliver negative returns.Corporate bonds: the hunt for yield continues. According to our in-house models, euro investment-grade (IG) corporate bonds can be expected to post positive returns of the order of 1.3% annually over the next 10 years, while US dollar IG returns will average 3.2%. USD high yield (HY) can be expected to post equity-like returns of 5.5% annually, compared with 3.5% for euro HY.Read More »
The latest edition of Horizon is out, presenting Pictet Wealth Management’s expected returns for the main asset classes over the next 10 years. We believe that the returns that can be expected from developed-market equities over the next 10 years will be over a third lower than average of the past 46 years. Growth potential and inflation trends suggest that expected annual returns for US equities could decline to just over 5% over the next 10 years, compared with a historic 10-year average of about 7%, for example.Our main conclusion is that there is no such thing as a free lunch. Better returns require taking more risk. According to our calculations, private equity will provide the highest annual returns, but with the greatest volatility risk, while cash (especially Japanese cash) will provide little or no return in spite of low historical volatility.Some of our expectations for the main asset classes are presented in the bullet points below. In general, our conclusions are based on proprietary risk-return models combined with our internal economic forecasts. Our calculations and methodology are detailed asset class by asset class in Horizon.According to our expectations, global equities can be expected to post a 6% return in US dollars annually for the next 10 years, which is lower than the 8.6% average long-term annual return of the S&P 500.Read More »
Pictet Wealth Management’s positioning in fast-evolving markets.Asset allocationImproved earnings growth should support attractive returns on developed-market equities.We still expect Treasury yields to rise this year. The 35-year fall in long-term interest rates, during which government bonds provided both strong returns and protection, has probably ended. The protection that government bonds provide for portfolios is therefore set to come at a cost again.Volatility on equity markets is currently low, but tail events look underpriced. Although this stands to be a risk-on year, volatility could be sharply higher than in 2016. We shall continue to keep well diversified portfolios and look for smart ways to protect them.Developed-market (DM) equities are likely to offer superior returns and less volatility than emerging-market (EM) equivalents in 2017: strategically we still prefer to play EM through DM. However, EM assets may offer attractive opportunities on a tactical basis.CurrenciesThe US dollar (USD) lost momentum in January, in tandem with political and market developments and lack of details on the Trump administration’s fiscal plans.However, although maturing, we expect the USD’s long-term appreciation trend to continue this year, on the back of an improving US growth and inflation outlook as well as divergent monetary policy.Read More »
Published: Wednesday January 25 2017Cesar Perez Ruiz, Chief Investment Officer at Pictet, discusses how the return of inflation this year will impact different asset classes.
Published: Monday January 16 2017Klaus Hommels, founder of a leading European venture fund, explains his approach to investing in tech start-ups, the qualities he looks for in entrepreneurs and how he identifies new opportunities.As one of Europe’s leading business angels, Klaus Hommels has established a remarkable success record with investments in some of the largest European and worldwide internet start-ups. They include Skype, Facebook, Airbnb, King, QXL/Tradus, Xing and Spotify (where he is a board member). He has also been named European investor of the year by several organisations over the last ten years.Lakestar, the venture capital firm he founded, makes investments ranging in size from EUR500,000 to EUR50 million which gives him the utmost freedom in an inefficient asset class where assets are not accurately priced. What he looks for when making investments is the quality of the entrepreneurs.‘It’s the people who make the difference. Ideally, I want someone aged between 23 and 34 with a tech background, who has discovered a problem in daily life and is totally passionate about solving it with technology. Because it is difficult to be a lone wolf, I like there to be a co-founder to share the grief and the belief. And the product must be scalable for a bigger market and doable in a clear way.Read More »
Published: Thursday January 12 2017As technological advances and new business models drive strong growth in robotics, artificial intelligence and industrial automation, these sectors are becoming increasingly attractive to investors.Since its early days in the 1960s, robotics has marched steadily into the mainstream, and is now launching disruptive innovations which are permeating the business world and people’s daily lives. The development of artificial intelligence (AI), in particular, is moving robots on from replacing tasks previously carried out by humans into cognition that involves interaction with them.With impressive prospects for growth over the next few years, robotics is also becoming increasingly attractive to investors. One conservative estimate made by the Boston Consulting Group two years ago is that growth will average 10 per cent a year. A more recent forecast from Tractica, a market intelligence firm that focuses on human interaction with technology, anticipates 36 per cent annual growth over five years.Experts have different definitions of what robotics and artificial intelligence are about, but even the lower of these two growth assumptions means a rate of three to four times expectations of growth in the global economy.Read More »
Published: Monday January 09 2017The development of deep learning AI programmes allows robots to emulate back-up staff in financial institutions, says leading computer scientist Qiang Yang – but they will not completely replace human decision-making.In many financial institutions, expert advisors rely on trading data, company reports and news stories to detect minute market signals and provide clients with investment recommendations. Their work is often supported by teams of interns who analyse corporate history, the competitive environment and market trends in detail.But developments in artificial intelligence (AI) could revolutionise this process, according to Professor Qiang Yang, by replacing those interns with robo-advisors which can replicate their abilities and surpass them in speed and accuracy. The AlphaGo deep learning programme beat the world’s best Go player in 2016 by developing a new generation of search algorithms which can be used to create learning systems able to emulate human capabilities.Prof Yang, who heads the computer science department at Hong Kong’s Science and Technology University, says that such programmes can analyse fundamental financial data going back 20 years. They can also read through mountains of documents and other forms of text, and reason about their contents to make predictions about market developments.Read More »