Perspectives Pictet

The CIO office’s view of the week ahead.Risk assets were positive across the board last week, with volatility falling back into low territory. The rally was driven by encouraging signs from the world’s two biggest economies. In China, a turn in economic indicators has started to show through with manufacturing purchasing manager indices (PMI) moving back into expansion territory in March. At the same time, the US has returned to a ‘Goldilocks’ environment, with Friday’s solid employment...

Latest nonfarm payroll report shows the ongoing resilience of the US economy, although some cyclical sectors are being affected by global headwinds.US employment rose by 196,00 in March, bringing the three-month average to a healthy 180,000/month— less than the 2018 average of 223,000, but more than in 2017.The unemployment rate was unchanged at 3.8%, below the Federal Reserve’s (Fed) ‘full employment’ estimate of 4.4%.Wage growth softened to 3.2% year-on-year (y-o-y) from 3.4% in...

We have moved up our stance on euro investment-grade credits to neutral, believing they have better potential than their US peers.US and euro investment grade (IG) indices have posted solid returns year-to-date thanks to a rally in credit spreads and sovereign yields linked to the dovish turn taken by some large central banks.We have turned neutral from underweight on euro IG credit, while retaining our underweight stance on US IG credit. First, euro IG offers an attractive yield pick-up...

European Parliament elections, to be held between 23 and 26 of May, will be a key political event in Europe. However, we expect limited short-term impact, given the European Parliament's limited ability to set Brussels' agenda.European Parliament (EP) elections will be a key political event in Europe, a form of ‘midterm election’ in which the electorates can state their approval or disapproval of their respective national governments. Turnout in EP elections has been on a downward trend over...

Pictet Wealth Management's latest positioning across asset classes and investment themes.Asset AllocationAlthough we expect the economic picture to brighten and the decline in earnings expectations to end, we have a prudent stance on global equities, as expressed in our decision to book some profits on global equities and to invest in put options on large-cap European and small-cap US equities.At the same time, our willingness to take on reasonable risk means that the reduction in equities...

Industrial gauges rebound on seasonality as well as policy easing.Chinese PMI readings moved back into expansion territory in March. The official Chinese manufacturing PMI rose to 50.5, up from 49.2 in February, and beating the Bloomberg consensus of 49.6, while the Caixin manufacturing PMI came in at 50.8, also up from 49.9 in February and beating the consensus expectation of 50.0. Details of the PMI survey report generally point to improvement in growth momentum, both on the domestic and...

The CIO office’s view of the week ahead.Good news came from the world’s second-largest economy after China’s manufacturing sector resumed growth in March, following three consecutive months of contraction. Employment in the sector also grew and new export orders even managed to move back into expansion territory, despite continued uncertainty around the outcome of trade talks between China and the US. We read these indicators as encouraging signs that the Chinese government’s fiscal stimulus...

Increased US export capacity would probably force OPEC+ to change its current tactics.After last year’s collapse, oil prices have found support since the beginning of this year for several reasons. At this stage, the main question is whether the recent surge in prices is sustainable or whether we will see renewed oil price volatility, with the possibility of a repeat of 2018.The recent release of the International Energy Agency’s annual report is an occasion to answer this question and to...

German growth may remain subdued in H1 2019, before picking up somewhat in H2 2019 as some near-term risks dissipate.Germany’s leading indicator, the Ifo index, rose in March, driven by an increase in both sub-components: current assessment and expectations. The Ifo index differs in make-up from Markit’s purchasing manager indexes, but at the sector level, the story is the same: the more domestically driven services sector is showing signs of resilience, while the most export-oriented...

The CIO office’s view of the week ahead.Last week, the 10-year US Treasury yield dipped below the yield on the 3-month bill for the first time since 2007, a year before the last recession. Should we be worried? Not excessively. Yes, the Federal Reserve has lowered its rates and growth forecast (just like the European Central Bank – ECB – before it), German manufacturing has slumped, and the Chinese economy is still in a funk. Yet we think that the signals sent by the yield curve have been...