The Swiss private bank and wealth management firm is still positioned for difficult equity markets, but within that overall stance, prefers to hold US to eurozone equities. It predicts only sluggish Chinese GDP growth this year.

Pictet Wealth Management is cautious about global equity markets and remains underweight this asset class; it smiles on business themes such as e-commerce, healthcare and biotech, while it is neutral on US government bonds.

The Swiss firm updated investors on where it is deploying assets in the present macro-economic environment that has been hit by the COVID-19 pandemic. 

Within equities, Pictet said it has boosted holdings of US stocks and cut those in the eurozone. 

“Supported by low government bond yields, markets rebounded in April. Overall, however, the market revival has been narrowly based and price-earnings in some areas like consumer discretionary are above the lows of previous recessions. Analysts have been trimming their earnings forecasts for this year, but the rebound next year is expected to be stronger in the US. Along with the tech theme, this has led us to change our stance to neutral US equities and underweight euro area ones. Our focus on structural growers continues to stand us to good stead,” Pictet said. 

On emerging-market equities, the firm said these have lagged in the recent market rebound. Although such stocks are cheap, Pictet said it wants to wait for a rise in the global economy before emerging market equities perform again in any sustainable way.

Bonds
“We remain neutral US Treasuries which, despite the prospect of massive bond issuance, continue to protect portfolios, whereas we have a negative stance on core euro, Swiss and Japanese bonds because of negative yields,” it said. 

“We still prefer short-duration, quality (investment-grade) corporate bonds to high yield. While we have shifted down our stance on the euro versus the US dollar to neutral, our preference goes to defensive currencies, as well as gold,” Pictet said.  

On the macro-economic front, Pictet predicts that there will be 1.2 per cent gross domestic product growth in China this year. In Japan, the bank expects Japanese GDP to fall by 5.8 per cent, a downward revision to earlier forecasts prompted by recent business surveys.

“With consumers tempted to remain cautious, the oil sector in deep difficulty and a big rise in unemployment, we expect dire Q2 GDP figures for the US. We have reduced our GDP forecast for 2020 as a whole to -7.7 per cent. Likewise, we expect the biggest hit to euro area growth to occur in Q2, and are now pencilling in full-year GDP growth of -9.5 per cent,” it said.