Pictet Recommends U.S. Stocks for First Time Since 2006 on Euro

Discussion in 'Wall St. News' started by ASusilovic, May 19, 2010.

  1. May 19 (Bloomberg) -- Pictet & Cie., Switzerland’s biggest closely held private bank, is advising European clients to buy U.S. stocks for the first time in four years on the expectation the euro will fall to parity with the dollar.

    Pictet has recommended switching from euro investments into gold, emerging market debt and U.S. stocks since April 30, said Chief Investment Officer Yves Bonzon. That reverses advice given to clients in 2006 to drop U.S. stocks as local markets offered similar performance without the currency risk, he said.

    “There’s no panic, but there are fears, real fears over the future of the euro as a reserve currency,” Bonzon said in an interview from Geneva. “A few months ago it wasn’t even an issue, now it’s a paradigm shift.”

    Global demand for long-term U.S. financial assets climbed to a record in the wake of the sovereign debt crisis in Greece, U.S. Treasury Department figures show. Pictet, a 205-year-old bank that managed 251 billion Swiss francs ($222 billion) for clients at the end of 2009, expects the euro to reach parity with the dollar within 18 months, says Bonzon.

    The 16-nation euro fell to a four-year low of $1.2235 on May 17. The currency has declined 13 percent this year, partly on concern an aid package of almost $1 trillion agreed last week to prevent defaults by countries including Greece, Spain and Portugal won’t reduce economic imbalances within the region.

    U.S. Asset Purchases

    Purchases of U.S. equities, notes and bonds totaled $140.5 billion in March, more than double economists’ projections, after net buying of $47.1 billion in February, the Treasury Department said May 17. Treasury purchases rose by the most since June as China, the largest lender to the U.S., added to its holdings for the first time since September.

    “This is real money that’s leaving and won’t come back,” says Bonzon. “It turns out that the euro is less of a deutsche mark and more of a drachma than anyone thought possible,” he said, referring to the former currencies of Germany and Greece.

    Assets under management EUR80.0 bn (31 March 2010)