Our outlook

House View, June 2021

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

Perspectives Pictet

House View, June 2021


As economies re-open, international trade and global industrial production have moved above their pre-pandemic levels. Amid soaring commodity prices, the rise in oil prices has been contained by excess capacity.

Quarterly GDP growth in the US could reach 10% in Q2. Supply bottlenecks could last for several months, leading us to raise our forecast for the consumer price index to 3.4% in 2021 (but we see price rises moderating next year).

In the euro area, services have been catching up on the recovery in manufacturing, where momentum has been affected by supply issues. We have revised up our headline inflation forecasts for the euro area but believe data will be erratic.

A slower-than-expected revival in consumer spending means there is some risk to our GDP forecast of 9.2% for China this year.


The strong possibility that the Fed will provide signals about tapering its quantitative easing during the summer could provide some short-term help to the US dollar, as could higher volatility in risk markets. Nevertheless, since we believe we are a long way from a Fed rate hike, we still see the dollar declining against the euro (to USD1.26 per euro over the next 12 months).

Asset Allocation

We have lately turned slightly more cautious on equities as markets show signs of fatigue and concerns grow about inflation, elevated valuations and other factors. However, the cyclical rotation still offers potential, as do companies with pricing power and tactical options trades. We remain relatively better disposed toward euro area equities than their US peers.

Euro periphery bonds have joined the list of other developed-market bonds on which we have an underweight stance. We have also shifted to an underweight stance on euro high yield, where we see limited scope for further spread compression as inflation rises and the ECB faces pressure to become less accommodative. But we have moved from underweight to neutral on US high yield. We maintain our overweight conviction on private equity and hedge funds and remain committed to active management in view of market dispersion and divergence at several levels.


The Q1 earnings season offered tangible evidence of the recovery in corporate earnings. Given bullish guidance and strong base effects, Q2 could see even stronger earnings growth. Yet equities have been struggling of late, with valuations a significant headwind, particularly in the US. Nevertheless, we remain overweight on stocks in the UK and Japan, where upside potential has not yet fully materialized.

The performance of Asian equities picked up in May despite signs growth momentum in China may be slowing, occasional upsurges in covid-19 infections and regulatory issues. We remain tactically neutral on emerging[1]market equities overall.

Upside earnings surprises were particularly prevalent in sectors like consumer discretionary, financials and energy in Q1. But our interest is being piqued in parts of the healthcare sector, which were somewhat left behind during the latest bull market.

Private Equity

Fund-raising in private equity has picked up considerably after an initial covid-induced slowdown, while ‘dry powder’ has declined as a rich palette of opportunities has emerged.

Fixed Income

Signals from the Fed about its plans for scaling back its asset purchases could lead to a renewed rise in bond yields – meaning we are sticking to our year-end forecast of 2.1% for the US 10-year Treasury yield. The rise in real rates could drive the next leg up in yields once US inflation expectations begin to stabilise.

Credits have mostly continued to record excess returns. Yield differentials and the US’s head-start in the cyclical recovery mean we are neutral on US credits but underweight their euro area peers.

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