Perspectives Pictet

Kross method

Political gridlock has been good news for US stocks in the past, but Tuesday’s midterm elections come at a time of rising doubts about market prospects.The US midterm elections take place on Tuesday 6 November. Based on recent polls, the most likely outcome is that the Democrats will regain a small majority in the House of Representatives, while the Republicans keep a small majority in the Senate.Should the Democrats take control of the House, Washington D.C. could be back to ‘gridlock as...

Pictet Wealth Management's latest positioning across asset classes and investment themes.Asset AllocationWhile the recent sell-off might have been overdone in view of fundamentals that remain basically sound, market gyrations and our expectation of further volatility mean we remain neutral equities overall. The current environment favours active management and a tactical allocation approach, exemplified by the partial sale of equity options we acquired to protect portfolios in early...

The transition to new leadership in Germany could have implications for Europe as a whole.As a consequence of the heavy drop of support in recent regional elections, Chancellor Merkel has declared she would not run again for leadership of the CDU at the 6-8 December party convention. Merkel also said she would retire from politics at the end of the current parliament in 2021. It is questionable whether she will get that far, and well before then, the transition to a new leader amid a loss of...

Strong wage growth should support the recovery of euro area inflation in the coming months.Euro area flash HICP rose from 2.1% year on year (y-o-y) in September to 2.2% in October, in line with expectations and the highest level since December 2012. Crucially, core inflation (HICP excluding energy, food, alcohol and tobacco) rebounded from 0.9% to 1.1% in October. Energy inflation rose to 10.6% y-o-y from 9.5% y-o-y in September. Food, alcohol and tobacco inflation eased, by 0.4 percentage...

Internal migration patterns could have far-reaching political consequences in coming elections.One salient feature of the US since its foundation has been the dynamism of internal migration. In recent decades, the trend has mostly been one of southern and western tropism, with an outflow of population from the north (the northeast in particular), to the south and west of the country.This trend seems to have amplified since the 2008 financial crisis. And data for this year suggests a further...

While growth in France rebounded, Italy stalled in Q3. Our full-year forecast for the euro area remains unchanged but is clearly at risk.According to initial estimates, growth in the euro area slowed in Q3 to 0.2% q-o-q (quarter on quarter) from 0.4% in Q2. These latest GDP results were below consensus expectations and our own forecast. This was the weakest quarterly growth figure for the euro area since Q2 2014 and marks the widest divergence vis-à-vis the US since 2015.Advanced estimates...

The government is ramping up spending and tax cuts to households to relieve pressure on the economy. Corporates may also benefit from fiscal measures.As the economy continues to decelerate, the Chinese government is ramping up fiscal policy, in order to offset downward pressure. Since June, the government’s fiscal spending has picked up significantly, although it remains fairly modest compared with previous years.In the first five months of the year, China’s fiscal policy was on the tight...

The CIO office’s view of the week ahead.Last week’s continued equities sell-off was driven by disappointment with the earnings reporting season. Having propped up market returns for much of this year, tech’s poor performance was particularly noteworthy. Last week, below-expectation metrics from Amazon and Alphabet (Google’s parent company) flattened the S&P 500’s returns for 2018, while European equities have been much more disappointing. Excepting financials, top-line data are driving...

"Financial Risk and Public Debt Management in the Euro Zone" The Johns Hopkins SAIS Global Risk Conference Nicola Giammarioli, European Stability Mechanism, Luxembourg Frederik Ducrozet, Pictet Wealth Management, Switzerland Michala Marcussen, Société Générale, France