Pictet North America Advisors SA

2024 Weekly Update

Decent growth

Market update, Macroeconomy, Highlights, What to watch from the Investment team of Pictet North America Advisors.

The content of this document is for information purposes only and is not to be used or considered to be an investment recommendation, or an offer or solicitation to buy, sell or subscribe to any securities or other financial instruments. It does not take into consideration the specific investment objectives, financial and fiscal situation or particular needs of the addressee. It reflects PNAA’s beliefs based on its own views of the direction of the global macroeconomic market, its investment process and other relevant factors.

Market update

The S&P 500 closed the week at 5,099.96, +2.67% higher. The Dow Jones closed at 38,239.66, +0.67%, with the Nasdaq higher by +4.23%. The volatility index VIX closed the week at 15.03 down from 18.71. The Euro Stoxx 600 surged +2.13%.

The 10-year UST closed at 4.66% up from 4.62% a week before. The yield curve is inverted with the yield spread between the 3-month and 10-year UST at -75bps. US Corporate Bond spreads: Investment Grade tightened 2bps at 158bps and High Yield tightened 11bps at 338bps. German 10-year Bunds yield closed at +2.58% up from +2.50% a week before. In Europe, Corporate Investment Grade spreads tightened 3bps at 123bps and High Yield spreads tightened 19bps to 346bps.

The US Dollar Index (DXY) depreciated -0.20% last week and closed at 105.94. The Euro closed at 1.0693 (+0.35%); the Yen depreciated -2.39%, closing at 158.33 and the Swiss Franc depreciated -0.44%, closing at 0.9142. Gold closed at $2,337.96 depreciating -2.26%. Oil was higher, Brent closed at $89.50 (+2.53%) and WTI at $83.85 (+0.85%).



The latest Q1 US GDP release showed a downside surprise on growth and an upside surprise on inflation. Q1 GDP Growth came in at 1.6% q-o-q. That was well below the 2.5% growth that economists were forecasting, and it compares with real GDP growth of 3.4% in the prior quarter. Relative to expectations, part of the downside surprise was driven by net exports, which subtracted a hefty 0.9% from headline growth. The drag was due to slowing exports and strong imports, itself an indication of solid domestic demand. Consumption growth also came in a touch weaker than expectations, slowing to 2.5% (consensus: 3.0%) from 3.3%. However, all the slowdown was in goods spending, which contracted for the first time in six quarters. Services consumption growth powered ahead to a strong pace. Domestic final sales, a better gauge of final demand, grew at a robust rate of 2.8%, slowing only marginally from 3.5% in Q4. Quarterly core PCE inflation came in at 3.7% q-o-q annualized, above consensus expectations (3.4%) and up sharply from its slow pace in Q4.

US inflation

The US March PCE inflation came in line with expectations at +0.3% m-o-m. In year-on-year terms, the March PCE release was just above expectations at +2.7% (vs 2.6% expected). The month-on-month core print was also in line with consensus at +0.3%, and at +2.8% y-o-y (vs 2.7% expected). The March data also pointed to a still vibrant US consumer, with real personal spending up +0.5% on the month (vs +0.3% expected). Overall, the US economy continues to grow at a solid pace despite monetary constraint. Meanwhile, inflation risks stalling out and becoming stuck at a higher level than expected before. Solid domestic demand and upward revisions to inflation suggest the Fed will take an even more patient approach to policy adjustment. At the FOMC on Wednesday, investors expect a hawkish hold where Chair Powell would signal the data suggest later and fewer cuts.

Global PMIs

The US composite PMI was down to 50.9 in April (vs. 52.0 expected), which is the lowest in 4 months. In terms of subcomponents, new orders were down to a 7-month low of 48.4, whilst the employment index fell to 48.0, which is its lowest since May 2020 at the height of the pandemic. In sectoral terms, services fell to a 5-month low of 50.9 (vs. 52.0 expected), and manufacturing was at a 4-month low of 49.9 (vs. 52.0 expected). In Europe, the flash PMIs showed a further improvement in April. In particular, the Euro Area composite PMI hit an 11-month high of 51.4 (vs. 50.7 expected), and the services PMI was up to 52.9 (vs. 51.8 expected). The only notable weak spot was in manufacturing, where the Euro Area PMI hit a 4-month low of 45.6 (vs. 46.5 expected). In the UK, the composite PMI was up to 54.0 (vs. 52.6). In Japan, manufacturing and service activity improved in April to its highest levels in nearly a year. The Jibun Bank flash manufacturing PMI rose to 49.9 in April, as against a level of 48.2 in March. The services PMI advanced to 54.6 in April up from 54.1 in March indicating that the service sector continues to remain the primary driver of growth. Lastly, Australia’s Judo Bank PMI data for April showed the manufacturing PMI rising to 49.9 from 47.3. Meanwhile, the service sector PMI came off slightly from 54.4 to 54.2, though still registering a decent growth environment. The composite PMI hit a 24-month high of 53.6 in April, an improvement from the previous month's 53.3.

Bank of Japan

The Bank of Japan kept interest rates around zero (short-term interest rate target at a range of 0-0.1%) and highlighted a growing conviction that inflation was on track to durably hit its target of 2% in coming years, signaling its readiness to hike borrowing costs later this year. BOJ Governor Kazuo Ueda said the central bank would raise interest rates if fresh data back up its latest price forecasts or if inflation overshoots the projections. But he offered few clues on when the next rate hike will come and ruled out shifting to a full-fledged reduction in the BOJ's bond purchases, underscoring its focus on keeping borrowing costs low even at the cost of accelerating yen falls.



Roughly 60% of S&P500 companies have reported their earnings. EPS is currently 5% ahead of consensus with Tech doing most of the heavy lifting on the upside. Alphabet reported significant upside on EPS margins thanks to higher sales and cost cutting and announced their first ever dividend. Results were also strong for Microsoft which reported EPS of $2.94 vs. $2.82 expected and revenue of $61.9bn vs. $60.8bn expected. 174 companies will report this week with Amazon (Tuesday) and Apple (Thursday) being the standouts.

On rates

Treasury yields saw their highest weekly close year-to-date, up +0.9bps to 4.996% for 2yrs and +4.3bps to 4.665% for 10yrs. This came on the back of strong PCE and labor data on Thursday which pushed down expectations of a July rate cut. Markets are embracing the high-for-longer view, with just one 25bps cut priced in this year after expecting 150bps of cuts in January. All eyes will be on the FOMC this Wednesday with investors expecting Chair Powell to continue characterizing cuts as a question of when, not if, and to provide additional details on slowing quantitative tightening. The story was similar in Europe, as investors dialed back their expectations of ECB rate cuts by -2.2bps on the week to 72bps. 10yr bund yields rose +7.5bps on the week to 2.57%, despite a sizeable recovery on Friday (-5.5bps).

What to watch

  • Monday: Germany CPI (Apr.); US Dallas Fed Manufac. (Apr.)
  • Tuesday: France CPI (Apr.), GDP (1Q); Italy GDP (1Q), CPI (Apr.); Germany GDP (1Q); Euro area CPI (Apr.), GDP (1Q); US Conf. Confidence (Apr)
  • Wednesday: UK Manuf. PMI (Apr. F); US ISM Manuf. (Apr.); US FOMC Rate Decision, Durable Goods Orders (Mar., prel.)
  • Thursday: Italy, France, Germany, Euro area Manuf. PMI (Apr.)
  • Friday: US Non-farm payrolls (Apr.)