Perspectives Pictet

Huge uncertainties hang over the proposed summit between the US and North Korea leaders.The South Korean national security director announced that the US President Donald Trump had accepted an offer of a meeting from Kim Jong Un, the leader of North Korea before May. While it has long been our view that a military conflict between the US and North Korea is relatively improbable, the announcement still came as a surprise.The proposed summit is definitely a big step in the right direction that...

CEO sentiment reaches a record high, but protectionist tendencies could impact confidence down the road.US businesses are feeling good – in fact, they are borderline euphoric. The latest evidence comes from the quarterly Business Roundtable CEO economic outlook index, a survey of 137 CEOs, conducted in February, which rose to its highest level since the survey began 15 years ago. All three sub-indices (capex, employment, sales) rose to fresh highs.Particularly encouraging was the sharp rise...

After a solid February job report, we continue to expect four Fed rate hikes this year (and two in 2019).There are two main conclusions to be drawn from the February US employment report. First, the US economy’s underlying momentum is particularly robust, consistent with our view that GDP growth will pick up to 3.0% this year, from 2.3% in 2017. Second, while the labour market is tight, there is still some slack left; in other words, the US labour market is not (yet) overheating.That...

Despite tensions since the beginning of the year, there is no evidence of FX market interventions by the Swiss central bank.In the wake of the financial crisis, the Swiss National Bank (SNB) increased massively the monetary base to provide liquidity and limit the Swiss franc’s appreciation. The expansion in the monetary base can essentially be seen in the form of an increase in sight deposits held by domestic Swiss banks at the SNB. The SNB does not communicate on its interventions in the...

Our EM currencies scoreboard shows valuation factors driving the Chinese renminbi turning negative, while idiosyncratic factors behind the South Africa rand have improved.Our Emerging Market (EM) FX scorecard, designed to assess the attractiveness of a given currency over the coming 12 months, ranks 10 EM currencies according to key criteria such as growth and vulnerability to external shocks.There have been only few changes over the past month. Our EM FX scorecard still shows the Brazilian...

We continue to expect the ECB to announce a gradual tapering of QE in the middle of the year.The ECB made one small change to its communication in March consistent with a normalisation process that is likely to remain very gradual. In line with our expectations, today the Governing Council (unanimously) decided to drop its commitment to increase asset purchases “in terms of size and/or duration” if needed, which had steadily become more difficult to justify and less credible anyway. In...

After GDP growth of 1.7% in 2017, we expect the Japanese economy to continue its cyclical recovery in 2018 but momentum is slowing.The second preliminary GDP reading showed that Japanese GDP rose 0.4% over the previous quarter (1.6% annualised) in real terms and 2.0% year-over-year (y-o-y). This latest data release points to Japanese GDP growth of 1.7% in full-year 2017, slightly below our forecast of 1.8%. This still marks the highest annual growth rate for Japan since 2013, and extends the...

Alongside our core scenario for this year, we have a downside one which includes political and geopolitical developments that could contribute to increased market volatility in the months ahead.Over the past year and more, market fundamentals have managed to overcome the occasional, short-term bouts of volatility triggered by political and geopolitical factors. But we cannot dismiss the possibility that these factors will impinge more forcefully on economies and financial markets in the...

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The escalating trade deficit with China comes at a politically sensitive time.The release of January trade data could not have been more topical, coming as it does shortly after the Trump Administration announced fresh tariffs on imports of steel and aluminum, in the context of dangerously hardening trade rhetoric.The monthly US trade defict rose to USD 56.6bn in January, the highest since October 2008. And the politically-sensitive deficit with China rose to USD 36.0bn (non-seasonally...