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Perspectives Pictet
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Perspectives Pictet

China looks to new policies to boost infrastructure spending

To stabilise growth, the Chinese government will likely put more focus on infrastructure investment. A new policy announced recently could give a further boost to this sector.Activity data in May point to continued weakness in Chinese economic momentum, with growth in both fixed-asset investment and industrial production slowing last month. The only positive news came from retail sales, where growth picked up after the slump in April—but this rebound was probably due to seasonal effects....

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The Fed talks the talk, but in no rush to cut

All eyes will be on the Fed policy meeting this week. We believe thoughts of immediate action are premature, but the Fed will push through ‘insurance’ rate cuts in the coming months.The Fed should remain on hold on 19 June, but Chairman Powell is likely to mention the possibility of cutting rates in the coming months, especially if trade tensions continue. Potential monetary easing would be framed as ‘insurance’ rate cuts, similar to those pushed through in 1995 and 1998, mostly to backstop...

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Weekly view—Pre-emptive guidance

The CIO Office's view of the week aheadAs uncertainty continues to run high, so does anticipation around the Fed’s meeting this Wednesday. The Fed is now confronted with a dilemma: economic data is not soft enough to merit rate cuts, as evidenced by last week’s US retail sales data. However, inflation expectations have reached new lows, adding pressure on the Fed to cut. Meanwhile, markets have priced in two rate cuts for the year, the first for July. While the Fed is widely expected to...

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Bund yields — Heading further down?

Our central forecast is for Bund yields to rise (feebly) into positive territory by the end of this year, although risks are tilting to the downside.Four main factors have been driving down the 10-year Bund yield, which reached an all-time low of -0.26% on June 7. Considering changing circumstances, we have lowered our year-end target for the 10-year Bund yield from 0.3% to 0.1% and expect it to remain in negative territory until at least October in our central scenario (55% probability). As...

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How dovish can Swiss monetary policy go?

The Swiss National Bank finds itself having to deal with an uncertain growth and inflation outlook as well as persistent external risks, but it is unlikely to pre-empt the ECB on interest rates.At its meeting on 13 June, the Swiss National Bank (SNB) will face an uncertain growth and inflation outlook. Economic data have been mixed and, more importantly, external risks (intensification of trade disputes, Brexit, Italian budget disagreements…) have increased. Since the last SNB meeting in...

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Weekly view – Dovish murmurs

The CIO office’s view of the week ahead.ECB president Mario Draghi has gone as dovish as possible without cutting rates, saying for the first time that he is prepared to cut interest rates and redeploy quantitative easing before he leaves the bank this autumn. Any interest rate rise in Europe will not happen until the second half of 2020 at the earliest, he suggested. As global uncertainty around trade remains elevated, the outlook for large exporting economies like Germany looks every more...

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Oil prices are reeling

The escalation in trade tensions, the dimming of global growth prospects and a surge in US export capacity have pushed us to lower our oil forecasts.The recent plunge in prices suggests that oil is acting like a leading indicator of global economic growth, reflecting investors’ concerns that lasting trade disputes will dent future growth and risk pushing the world economy into recession.Business sentiment has been deteriorating for some time. By May, the world Purchasing Manager Index for...

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House View, June 2019

Pictet Wealth Management's latest positioning across asset classes and investment themesAsset allocationWe have turned tactically underweight on global equites, including US equities, given elevated valuations, mixed economic data and rising trade tensions. We remain neutral on euro area equities, where valuations are generally more reasonable than in the US. We have also moved from an overweight to neutral stance on Asian emerging-market equities.At the same time as we remain focused on...

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Why has euro inflation stayed so low?

Weak inflation data pose a conundrum, both in terms of the growth outlook and the ECB’s policy stance. We believe the ECB will stay on hold in 2020.The euro area headline flash Harmonised Index of Consumer Prices (HICP) dropped to 1.2% year on year in May from 1.7% the previous month.  Core inflation fell by 50bp to 0.8% y-o-y. While this reflects volatility stemming from the date of Easter this year, one can legitimately ask why inflation remains so low in the euro area, with the underlying...

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ECB preview – so close, yet so far away

The European Central Bank’s meeting on 6 June is unlikely to result in major policy changes, but instead will focus on risk assessment and TLTRO-III. The press conference could set the stage for a policy response should downside risks materialise.Long story short, the ECB should continue to err on the side of caution, while preparing for dovish contingencies, which could range from the easy to the scary. The easy plan would follow if risks to the outlook remain firmly tilted to the downside....

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