Our outlook

House View, February 2021

Pictet Wealth Management's latest positioning across asset classes and investment themes.

Perspectives Pictet

House View, February 2021


The US economy grew at an annual rate of 4.0% in 4Q 20 (first estimate), leaving US GDP down 3.5% in 2020 year over year (y-o-y). While continuing coronavirus concerns may delay a full recovery, we expect the US to register 4.7% annual GDP growth in 2021.

Recent lockdowns mean recovery in the euro area could be delayed. Our 4.3% forecast for GDP growth this year is unchanged for now, but downside risks are rising.

Chinese GDP expanded by 6.5% y-o-y in 4Q and by 2.3% in 2020 as a whole. We expect growth to reach 9.3% this year, with consumer spending and services progressively taking over from manufacturing as the main driver. We expect Japanese GDP to grow by 2.7% in 2021 from -5.2% in 2020 and the Bank of Japan to stay pat on monetary policy for now.

Asset allocation

Due to optimism about recovery and expansive economic policies, we continue to expect a partial rotation toward ‘cyclical’ stocks and sectors that were laggards in last year’s equity rally. We also like beaten-down companies that maintained strong balance sheets throughout the crisis and are encouraged by the prospects for small caps.

The ‘Green recovery’ and thematic investing across fixed income and equities remain important parts of our asset allocation.

We have moved to tactically underweight US Treasuries in view of rising inflation expectations, while we still see (limited) potential in euro high yield.

The uptick in corporate events, including M&A, should help event-driven hedge-fund strategies.

We continue to see the value of diversification, dynamic allocation strategies and trading volatility through options.


Persistent pandemic concerns have started to curb the recent increase in commodity prices in late January. With commodities bound to benefit from global recovery, the moving into balance of supply and demand means we continue to believe Brent oil will hover around USD55 per barrel in Q1.


Safe-haven buying and the shot in the arm for the US economy from successive fiscal support packages has interrupted the US dollar’s downturn trend in recent weeks. But we see no reason to change our negative medium-term view on the currency versus the euro given the dollar’s limited yield advantage and the US’s large twin deficits, as well as its own fundamental overvaluation.


Equities paused at the end of January, reflecting a spurt in implied volatility and lingering coronavirus fears. However, corporate guidance has been upbeat and we maintain our view that improving earnings will mean the rotation into cyclicals resumes.

EM indexes outperformed in January, largely thanks to Asia, with recent market dynamics in that region driven by sales growth and soaring demand for electronic components. Mindful of issues in individual countries, we are sticking with our decision to seek a broad-based exposure to the EM complex.

Consumer stocks are shaping up to be a major beneficiary of the progressive re-opening of the global economy, although we are mindful of the potential impact of rising input prices on margins.


A long rally and big rise in valuations means the opportunity set for hedge funds is broadening to relative value, capital structure and convertible bond arbitrage strategies, among others. Strategies around distressed debt are also worth considering.

Fixed Income

Amid plans for large-scale federal debt issuance, upward pressure on yields are leading us to tactically underweight US Treasuries. Nonetheless, we believe that inflation concerns will provide transitory.

The continuation of easy financial conditions could push credit spreads even tighter in the short term, although we think spreads will tighten only slightly over 2021 as a whole. We also expect CDS spreads to tighten slightly.

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