With the global economy picking up and markets rallying hard since late March, where do the best investment opportunities lie? PWM’s head of investment presents the case for US growth stocks and European cyclicals, particularly those linked to the ‘green’ transition. And there are ways for playing the volatility that inevitably lies ahead.

Markets are pricing in fully several optimistic scenarios, yet there are attractive plays in investment grade credit and equities. Meanwhile, over the summer, we await a clearer picture on how realistic this optimism proves to be over the longer term.
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The end of 2019 marks an opportunity to review not only a year, but a decade in the economy and markets. Central banks certainly dominated the last decade, but corporations also delivered – driving earnings growth that propelled both stock price returns and dividends. 2019 was an exceptional year in markets but earnings growth was flat. We go into 2020 with some reason for continued caution but also grounds for optimism, given several patches of green shoots that are visible.

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Markets have reached new highs, but looking beneath the surface reveals a more complex picture. Over the last 18 months, investors have ploughed into companies with a growth style bias at the sake of value, pushing the valuation differential between the two styles to an extreme. At this point, it does not require a dramatic rotation to narrow that valuation differential and we are now starting to see renewed investor interest in value-style stocks.

With growth indicators faltering and markets unsettled, policy makers in advanced economies are being forced to look at new ways to prolong the expansion. In many ways, their concerns are the same as their Chinese counterparts’. Could (Should) they also adopt Chinese economic policies?

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While a global recession may not be imminent, we are clearly late in the cycle and economies and markets are not immune from accidents. Certain well-defined investment themes are particularly relevant at this juncture, argues Pictet Wealth Management’s head of investments.

Equity markets have reached new highs, extending the longest bull market in US history. However, César Pérez Ruiz, Head of Investments and CIO at Pictet Wealth Management, is conscious of complacency in markets and keeping protection on portfolios as tail risks remain. Geopolitical developments such as the potential escalation of Iranian tensions and drawn-out trade negotiations between the US and China, could send short-term volatility through markets.
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Following the Fed’s recent dovish turn, we could expect other central banks to follow suit. However, according to Frederik Ducrozet, Strategist at Pictet Wealth Management, the ongoing trade tensions and idiosyncratic constraints facing central banks today could limit their room to manoeuvre. We expect the European, Japanese and Chinese central banks to contribute to rising global liquidity this year, more than offsetting any quantitative tightening by the Fed.
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2018 was a difficult year for markets and according to César Pérez Ruiz, Pictet Wealth Management’s Head of Investments and CIO, 2019 will be a year in which the “three amigos” will have to coexist. The bull will appear in economic deceleration, the bear in a democratic recession and the kangaroo across market dynamics.
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After years of low interest rates, investors need to prepare for a rise in the cost of credit.
Since the financial crisis, investors have benefitted from rising bond price, while companies have seen their funding costs decline to the lowest point in decades. But with central banks scaling back their support in response to good economic growth, the years ahead will be very different. Investors need to prepare for a rise in the cost of debt, says Global Strategist Alexandre Tavazzi.

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A pick-up in inflation fears contributed to the recent spike in bond yields that spilled over into equities. But while inflation remains a risk, Cesar Perez Ruiz, CIO at Pictet Wealth Management, remains sanguine about the global economy and risk assets and sees volatility as an opportunity for tactical positioning.

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The euro area is benefitting from a very strong momentum at the start of the year, supporting our view that economic growth will remain broadly stable in 2018 at around 2.3%. Risks to this rosy outlook include political events and a more hawkish ECB, although both look very manageable.

2017 was a remarkable year, with positive returns for a wide array of risk assets. The environment will likely remain supportive as well, but Cesar Perez Ruiz, CIO at Pictet Wealth Management, says he expects more normal market conditions in 2018, with spikes in volatility that offer greater opportunities for active management.

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2017 was a remarkable year, with positive returns for a wide array of risk assets. The environment will likely remain supportive as well, but Cesar Perez Ruiz, CIO at Pictet Wealth Management, says he expects more normal market conditions in 2018, with spikes in volatility that offer greater opportunities for active management. http://perspectives.pictet.com https://www.group.pictet/wealth-management

After a period of disappointment, Asian markets have outperformed for the past two years. And with paradigm shifts in businesses and economies, they still hold plenty of opportunities. So argues David Gaud, Chief Investment Officer for Asia at Pictet Wealth Management.

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The 4th edition of the Pictet Entrepreneurs held in Geneva in September 2017 brought together an exclusive group of 60 entrepreneurs and investors with a passion for innovation.
On day one the focus was on the future of cities, food, agriculture, health and living in a secure world. On day two, the discussions centered around success, personal wealth and responsibility.
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The economic expansion of the global economic cycle is not over yet and it is temporarily in-sync. We don’t anticipate a recession. While the real growth recently reached a peak, it should moderately decelerate or stabilize in the US, Eurozone, UK, China and Japan. Inflation is likely to moderately pick up. We should remain in a low interest rate environment and the interest rate curve should flatten. High single digit earnings growth should continue to drive the pursue of the equity bull market.

With the return of solid growth, Cesar Perez Ruiz, Chief Investment Officer at Pictet Wealth Management, discusses how anxiousness about turns in the monetary policy cycle is being expressed in forex rather than equity markets, where volatility remains low.

Economic 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.

Cesar 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.

Evidence 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.

Alexandre Tavazzi, Global Strategist at Pictet Wealth Management on factors that might hit market valuations.

Cesar Perez Ruiz, Chief Investment Officer at Pictet, discusses how the return of inflation this year will impact different asset classes.

The switch from monetary to fiscal stimulus, and a rise in earnings growth for the first time in two years looked like being two of the big themes for 2017. To these must now be added a third one: the unpredictability of a president Trump. Cesar Perez Ruiz, Pictet’s Chief Investment Officer, discusses the road ahead.

Cesar Perez Ruiz, Chief Investment Officer at Pictet Wealth Management, explains the impact of the current polarisation in politics and markets on investment strategy.

A loss of confidence by markets in the effectiveness of monetary policies is the biggest risk investors face at present. Cesar Perez Ruis, Chief Investment officer at Pictet Wealth Management, discusses the issue and explains what we expect from central banks.
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Christophe Donay, Chief Strategist, explains how markets are pricing in the risk of Brexit, and what the economic impact would be.

Alexandre Tavazzi, Chief Equity Strategist at Pictet Wealth Management, explains what is driving the current market rebound, and the key choices faced by investors seeking to profit from it.