Market: Pictet AM upgrades US equities to 'must buy

(CercleFinance.com) - Pictet Asset Management has upgraded its recommendation on US equities to 'overweight', deeming them 'unavoidable' in the current market environment.


"The US economy is an exception: its growth is well ahead of the rest of the developed world, its companies are posting solid earnings and its equity market is performing strongly", says the asset manager in its latest barometer.

In their study, Pictet AM's analysts express their conviction that the US economy will experience a soft landing, even under a Trump presidency, a positive configuration for corporate earnings.

In their view, the world's leading economy will manage to avoid a recession, while inflation will fall at a pace that should enable the Fed to further reduce borrowing costs in the months ahead.

As for Trump's victory, it looks set to benefit US equities by paving the way for further tax cuts, adds Pictet, even if these are unlikely to be as significant as during his previous term.

'Companies should maintain their profit margins, despite some of Trump's anti-immigration and anti-trade measures that will drive up costs', anticipates the asset manager.

In terms of asset allocation, Pictet AM thus continues to overweight equities due to lower interest rates, healthy earnings momentum and an improving economic outlook.

However, US equities have 'more to offer' than their counterparts in Europe, where conditions are less favourable, pointing to mixed corporate earnings in the months ahead.

Finally, the transition period in the US is conducive to an increase in geopolitical risk, leading Pictet AM's strategists to favour gold.

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