Audio commentary

Welcome to this week’s investment solutions commentary from Pictet Wealth Management, where we bring you a clear perspective on the latest market trends and key events shaping the financial and investment landscape. The global economic landscape continues to be shaped by volatility, with equity markets showing concerns over loan quality and rising debt levels. In the fixed income space, we maintain an underweight position in global and US high-yield bonds. However, the so-called K-shaped economy in the US — where the wealthy prosper while lower-income groups face challenges — poses a risk to the downside. While this is not our main scenario, we believe it is prudent to highlight this possibility for clients looking to diversify their portfolios. In this context, we favour a high-yield strategy that combines US Treasuries with the US High Yield Credit Default Swap Index. This approach is both resilient and highly liquid, particularly in stressed market conditions. It also offers competitive expected returns over the next 12 months compared to the US High Yield index. This strategy is more attractive than traditional high-yield bond funds, which have demonstrated liquidity issue in periods of stress. It also offers the advantages over directly holding bonds with a defined timeline for resolution in case of default. Unlike traditional bond funds, this solution becomes more liquid during market dislocations. Furthermore, the strategy can withstand up to 12% of defaults within the index before returns are adversely affected with markets conditions unchanged. In summary, this systematic approach positions the strategy to outperform traditional high-yield bonds, even in challenging market environments. It is particularly well-suited for investors seeking income and diversification during periods of heightened volatility. That’s all for this week’s review. Thank you for listening and as always, reach out to your advisor for any questions or tailored insights.

Welcome to this week’s investment solutions commentary from Pictet Wealth Management, where we bring you a clear perspective on the latest market trends and key events shaping the financial and investment landscape. Market volatility is on the rise, creating opportunities for professional investors to enhance returns through structured yield solutions. These strategies present a rather compelling means of balancing risk and reward, offering a steady hand to navigate the ebbs and flows of uncertain markets while fostering wealth growth. In recent weeks, the volatility index, a widely regarded barometer of market volatility, has surpassed the 20-point mark, signalling a notable uptick in uncertainty. This, coupled with a decline in correlations across major equity indices, presents a unique opportunity for yield enhancement strategies. Among these, Reverse Convertible Barriers and Phoenix Memory solutions stand out, offering a blend of defensive features and consistent return potential. Reverse Convertible Barriers, for instance, are crafted to deliver unconditional coupons alongside a measure of downside protection, up to a predetermined barrier level. Such products can be particularly appealing during turbulent times, as they provide a cushion against market fluctuations. What’s more, the pricing conditions in volatile markets often make these solutions even more attractive. For those with a greater appetite for risk in pursuit of higher returns, Phoenix Memory products present an interesting alternative. These instruments add a conditionality to the coupon making the product riskier but increasing its potential return. While they do carry a higher degree of risk compared to Reverse Convertible Barriers, they also offer the prospect of superior returns. Both of these solutions are tailored for sophisticated investors who foresee stable or moderately volatile market conditions and are keen to seize the advantages of current pricing dynamics. We would suggest placing a particular emphasis on index-based solutions rather than those tied to individual stocks. Indices tend to offer a more defensive posture and have consistently demonstrated robust historical performance. Indeed, backtesting indicates that Reverse Convertible Barriers with a 70% protection barrier have achieved full redemption in approximately 95% of cases since 1994. That’s all for this week’s review. Thank you for listening and as always, reach out to your advisor for any questions or tailored insights.

Welcome to this week’s investment solutions commentary from Pictet Wealth Management, where we bring you a clear perspective on the latest market trends and key events shaping the financial and investment landscape. This month, gold prices have stabilised after a strong rally, while equity markets continue toreach new heights. This presents a rather unique opportunity for investors to hedge against economic uncertainties with gold, while also capitalising on equity market gains growth through strategic diversification. Gold’s recent consolidation around the 4,000 dollar mark reflects a confluence of global factors. These include the Federal Reserve’s measured approach to rate adjustments, a US-China trade truce, easing tensions in the Middle East, and a broader pivot towards fiscal dominance. For investors, this presents two potential strategies: safeguarding gains through hedging or taking advantage of the current pause to increase exposure. For those invested in gold who want to mitigate downside risks, hedging strategies could beprudent. This includes long put options on gold, including look-back put strategies, or reallocating profits into capital-protected instruments linked to gold. On the other hand, for investors who are underexposed and seeking to increase their exposure, acquiring spot gold or exploring short-term Dual Currency Notes could be attractive options. Turning to equities, markets continue to deliver impressive returns, with major indices like the S&P 500 achieving record highs. That said, it’s worth noting that a significant portion of these gains have been concentrated among the Magnificent Seven technology stocks. While this concentration has been a boon for many, it also introduces a degree of concentration risk that investors might wish to address. To navigate this, we recommend diversifying equity holdings through bespoke solutions providing exposure to equity baskets aligned with three distinct strategies. The first strategy is focused on cash-rich US companies and financials. By combining quantitative and fundamental screening, this approach identifies businesses with strong balance sheets and low debt levels. The second strategy focuses on companies poised to benefit from mergers and acquisitions. This strategy ensures a balanced exposure across potential targets, consolidators and fee earners so it can adapt dynamically to shifting market conditions. Finally, the last strategy seeks to harness the potential of Europe’s broad structural revival. It invests in companies with substantial exposure to Central and Eastern Europe, particularly within sectors such as materials, industrials, and technology. In summary, blending the enduring stability of gold with the growth potential of equities provides a balanced approach to navigating today’s complex market landscape. By leveraging these tailored strategies, investors can build a resilient and diversified portfolio that is well-positioned for both current opportunities and future challenges. That’s all for this week’s review. Thank you for listening and as always, reach out to your advisor for any questions or tailored insights.

Welcome to this week’s investment solutions commentary from Pictet Wealth Management, where we bring you a clear perspective on the latest market trends and key events shaping the financial and investment landscape. Global equity markets have displayed rather impressive momentum this year, with major US indices achieving record highs. Thus far, global equities have climbed nearly 20%, buoyed by economic performance that has exceeded expectations and a robust showing from corporate earnings. This upward trajectory has been further underpinned by fiscal dominance and a growing appetite for real assets, which has bolstered investor confidence. That said, it’s not entirely smooth sailing. Lingering uncertainty around US trade policy continues to cast a shadow over the outlook for corporate profit growth as we approach 2026. Over the past month, President Donald Trump has either imposed or threatened tariffs on exports from key trading partners, including China and Canada. Moreover, there are emerging signs of market exuberance in certain sectors. Elevated earnings expectations and speculative investment patterns in the technology sector, in particular, evoke memories of the late 1990s tech bubble. In light of these dynamics, we believe this is a particularly prudent moment to prioritise diversification. Taking a strategic approach to spreading investments across regions, sectors, and strategies can provide a robust framework for safeguarding and growing wealth. Here are some opportunities we currently see in this context. First, regional diversification. We continue to hold an underweight position in US equities, instead favouring markets in Europe, Japan, and Switzerland. These regions have demonstrated encouraging performance and present notable growth potential. This year, we’ve adopted an overweight stance on each of these markets, increasing our exposure accordingly. Next, sectoral diversification. The healthcare sector, we believe, offers a rather compelling recovery narrative. While it has underperformed in recent times, the sector now benefits from greater regulatory clarity in the United States. Meanwhile, technology remains a promising area, though we advocate for a more discerning approach here—focusing on quality over momentum to mitigate risks tied to overvaluation. Finally, strategic diversification. The divergence between momentum-driven and quality-driven equities presents an opportunity to prioritise stability and sound fundamentals. High-dividend equities, in particular, stand out for their resilience in more volatile market conditions. We recommend funds that lean towards quality and offer strong dividend yields. These strategies often encompass investments in undervalued or overlooked assets, which are better equipped to weather potential market reversals. In summary, diversification across regions, sectors, and strategies enables investors to capitalise on strong market momentum while maintaining a focus on resilience and long-term wealth preservation. That’s all for this week’s review. Thank you for listening and as always, reach out to your advisor for any questions or tailored insights.