Monthly Investment Review - June

Global vision

LT macro regime. Shorter and risker cycles than in past decades. Imbalances, debt, resurging inflation, and geopolitics result in more cyclicality and variations in economic cycles

US and China financial conditions (FC) on their way to neutral. Deceleration of global liquidity from late 21 continues. Concomitant rise of USD, correction of risky assets and widening of spreads have - already - brought FC on the verge of neutral in the US. Early signs of more accommodative FC in China

Stagflation is the base scenario in 2022. Ultimately, a soft landing remains possible in the US. Europe has little chance to escape recession, like China if it does not accentuate its fiscal impulse

Geopolitics remains critical / hectic. Wars are disruptive and ultimately inflationary. They result in higher risk premium for financial markets

Fear and realized volatility spelled significant capital outflows. Higher cross-assets’ volatility and growing fear have induced margin calls and forced selling from retail investors

Unstable equity-bonds correlation, but no definitive regime shift. The long-standing regime of negative real rates is under growing test / challenge. Risks of a hard landing has lately restored appeal of duration rich assets

Repricing / correction mode is resulting in less expensive valuation. The combination of nasty fundamental factors will generate a succession of risk-on/off periods over next quarters. Unless ¨something¨ breaks in the meantime…

Markets’ action has - by far - preceded the Fed’s - The U-Turn of Powell triggered an unusually quick and sharp tightening of US financial conditions. All components of FI actually contributed to the rise: a stronger dollar, higher rates, wider spreads and a corrective equity market. According to its historic relation with developments of financial conditions, US ISM could soon visit a level below 50, featuring odds of a serious slowdown, if not a recession. The housing market is giving signs of exhaustion because of the dual action of higher Treasury bond rates and more cautious
banks, triggering larger spreads. This sector is a significant contributor to growth and an important vector of wealth effect.

The mid-term elections in November will take place in a poisonous internal political climate. The President is at a low ebb in the polls, the Democrats are certain to lose control of the Senate and even the House of Representatives. At best, we are headed for a cohabitation, and thus the paralysis of the Biden administration's budget initiatives. At worst, we are headed for an institutional crisis if the Republicans, led by Trump, continue their institutional defiance. This is not a climate conducive to raising policy rates, let alone if the economy takes a nosedive.
The Fed is likely to back-off from its hawkish rhetoric in H2
It may even pause around mid-term elections

Asset allocation conclusion - The very important selling flows and the extremely pessimistic psychology of private investors is rather reassuring: the first phase / wave of re-pricing / return to normal is well underway. The valuations of financial assets, which were sometimes exuberant, are also beginning to return to normal, particularly with the gradual disappearance of negative rates. However, the macroeconomic component will remain poorly oriented in H2. The inflationary irritation is not over.

It is difficult to see how the financial markets could sustainably return to the upside in this still very disturbed context. Geopolitical uncertainty will prevail and will also maintain pressure, in depth. We confirm our cautious bias.



The end of USD bull run - On mid-May, the USD index reached its highest level since December 2002 of just over 105. It had gained 7.5% in Q2, 9.8% in 2022 and 17% in one year. Given such strength, it will be hard to pull the USD even higher without the US monetary policy outlook and yields moving further in the currency favor, or another deterioration in risk appetite supporting haven demand for the USD.

The Fed policy outlook should remain hawkish. It should hike rates at a fast pace, with a 50bps hike in June and July before switching to 25bps in the remaining 2022 meetings. Powell warned that the Fed will continue to raise rates until there is “clear and convincing” evidence that inflation is receding.

The neutral interest rate is estimated to be close to 2.5%. However, as the market expects the Fed funds to reach 2.75% by year-end, a restrictive Fed policy is already priced in. There is less scope for an even more hawkish tone to pull the USD higher. In addition, the policy divergence that had supported the USD against most of its peers is being whittled away as other central banks continue to hike rates. By the way, US yields have peaked in early May, just before the USD index reached its high. So, USD bulls may be left dependent on risk appetite to keep the currency elevated.

The USD has slightly slipped from its 20-year peak. Momentum behind the long USD position should fade
Only periods of weak risk appetite and uncertainty could boost haven demand for the USD. However, it has now priced in the full Fed tightening. The prospect of other central banks hiking rates should eat into the USD gains

An EUR catch-up is underway - The EUR spent the first half of May underperforming the safe-haven USD and JPY and reached a 20-year low. This has been a trigger for the FX market to rethink whether there is much more value. The USD is already very high and the ECB signaling that it is very close to hiking rates. The policy dynamics should be moving in the EUR favor.

Most ECB members rhetoric has grown increasingly hawkish over the last couple of months. The next ECB policy announcement will be made on June 9th and is expected to signal that a rate hike will be made at the July meeting. The ECB will exit negative rates by September. The first ECB rate hike since 2011 should be EUR-supportive.



Market mindset is clearly switching - The MOVE, the US yields implied volatility index, reached its lowest level since the start of the year. This stabilization is a positive sign. The US Treasury market posted its first positive monthly return since last November. After focusing on inflation for the past several months, the market is dealing with a potential deep and faster-than-expected recession risks. Inflation expectations are on track to post their largest drop since March 2020. The markets now seem convinced that the Fed, or any other factor, will be able to contain inflation over the long term.

Bond volatility will decrease with lower long-end yields


Central banks determination - Chair Powell recently stressed that the Fed needed to see inflation coming down in a clear and convincing way and that a slight unemployment rate rise is the price to pay to achieve price stability. Recent activity indicators have disappointed expectations with a larger than expected drop in the PMI and a sharp decline in real estate data. This is fueling fears that a recession may be coming sooner in the US.

After having expected more than 75bps Fed Funds hikes in 2023, investors have sharply backpedaled. The bond market is now expecting the end of the Fed tightening cycle, or at least a pause, by mid-2023.

Various ECB members confirmed the need to move quickly away from negative rates. All of them are pre-announcing a lift-off in July, following the end of net asset purchases. The market is fully pricing it and is now expecting faster rate hikes but with the same overall hikes adjustment.

Lagarde and other ECB members continue to stress that policy normalization should be driven by the principles of optionality, gradualism, and flexibility. It is key to anchor longterm inflation expectations with a credible normalization of the monetary stance. The pace of normalization will have to be calibrated to reduce the uncertainty on future inflation. So, the speed of rate hikes could depend on the degree of economic slack. Unlike the US, which is in a situation of excess demand, it will justify a slower adjustment in the euro area. Most ECB members confirmed that the euro natural interest rate is well in the positive territory, in between 1% and 2%.

While we favor a total of 100bps of hikes, we exclude steps other than 25bps. A 25bps hike at every meeting in July, September, October, and December, while far from a done deal, would be in line with the idea of gradual normalization of ECB policy.
Shifts in risk sentiment are dictating the price action. ECB rate hiking expected to be faster but not higher
Long-end yields could redirect higher only if both risk sentiments and economic surprises strongly improve


Challenging moment in credit market - Investment-grade (IG) and highyield (HY) bonds have been both under pressure all year long, but a large part of that distress has stemmed from higher interest rates and wider credit spreads rather than deteriorating corporate fundamentals.

Surprisingly in such a context, the size of the IG bond market has continued to grow,  hitting $4.9trn in April, with new debt issuance holding up relatively well. Upgrades to IG from HY have positively contributed to market growth since Q4 2021, rising star companies adding $72bn.

Through now, IG issuance is down 14% while HY is down 75%. New issuance is normalizing near the 2019 level, after $1trn issued in 2020 to bolster liquidity at the pandemic onset. IG total maturities will reach $156bn in 2022, $272bn in 2023 and $302bn in 2024. The market will still have to digest large additional issuance amounts without the buyer of last resort intervention, central banks.

The BBB-rated companies dominate the IG bond market (60%). Downgrades to HY - given the current economic slowdown risks - will reduce the size of the IG market and push lower rated bonds spreads wide. IG will outperform HY



Rally in a bear market or correction in a bull market ? - We came close to a bear market for the global American and European indices, according to the classic definition of a correction of more than 20%. The Nasdaq entered it cheerfully with a decline of 32% between the highest (end of November) and the lowest (mid-May). To define a bear market, the magnitude of the correction is not the only factor, there must also be a notion of duration. In March 2020, the 35% drop in the MSCI World was a violent correction, rather than a bear market.

The rally, which began on May 20, is the result of a combination of favorable factors: 1) Technically, the indices were oversold and a double-bottom configuration had taken place with the appearance of support, 2 ) The fall in interest rates, the fall in the dollar and a possible peak in US inflation in March eased selling pressures on equities, 3) Indicators of investors’ sentiment were in the (very) pessimistic zone, in generally a good signal for a rebound in stock market indices and 4) China had started to ease health restrictions, particularly in Shanghai.

The results for the 1st quarter of 2022 turned out to be much better than expected, with a 9.2% increase in profits (4.6% expected at the start of April) and 13.6% in revenues for American companies, and 11% and 25% respectively for European ones. Despite problems of disruption and inflation, the outlook remains surprisingly good. Chinese economic growth will be an important element of the health of Western companies' results; after targeted measures, the Chinese government could launch broader stimulus programs with the end of the lockdowns.

The decline in the Goldman Sachs financial conditions index also explains the rebound in equities. The Chicago Fed Adjusted Financial Conditions Index is also turning around.

The week of May 25 saw the first net purchases in equity funds since early April, mainly in favor of the US and Asia.

All these points favor to a continuous rally, but we remain cautious on the future economic growth. We believe the rebound is an opportunity for a shift in sector allocation towards defensive sectors, Consumer Staples, Pharmaceuticals and Power Producers. And in a world of West-China/Russia confrontations and protectionism/ economic nationalism, commodities and defense are two sectors to focus on. Historical studies show that in times of stagflation (high inflation/low economic growth), such as in the 1970s, energy and agricultural commodities perform well and are the only traditional asset classes to deliver positive returns in real terms. Fighting inflation with a sharp rise in interest rates will be difficult due to a very high level of public debt.

We are maintaining our neutral stance on the US, an underweight on European equities, while we overweight Swiss equities.

The weakness of the dollar and the drop in US interest rates offer a window of opportunity to return to emerging equities. But it is a very tactical move, because emerging stocks are the weak link in this current environment: various disruptions, Covid, high energy and food prices, climate change, regional globalization, protectionism/ nationalism, weak global economic growth, energy transition. We avoid emerging countries that import energy and agricultural products. Outflows from funds invested in emerging assets are at the highest in 30 years. Emerging equities should become more attractive when central banks focus more on growth than inflation.

China is a great unknown. The economy is slowing and the real estate sector is under stress. Chinese equity funds saw the largest outflows. The Communist Party has taken control of Chinese society to return to the great principles of communism and control of the “perverse” effects of technology, online games and social networks on children. China wants to impose a new world security order, with Russia, with the Global Security Initiatives (GSI) to counter NATO and the Quad. The fate of Taiwan returns to center stage with the Russian invasion of Ukraine. For US and European institutional investors, Chinese equities represent a risk.



Global rise in raw materials - The pandemic, then the war in Ukraine, have shown the fragility of the globalization and the harmful interdependence of economies, and rekindled tensions between the US/Europe/Japan/Australia and China/Russia blocs. India is for the moment apart, since it receives its fossil fuels and its weapons from Russia and relies on the United States to counter China.

This complicated environment, accentuated by climate change, translates into higher prices for energy and agricultural goods. Industrial metals are down due to China and its confinements which partially stopped the economy and the real estate crisis; China accounted for 25% to 50% of global demand. Investors lack visibility on a Chinese economic recovery to return to metals, but they could be interested again if China announces major support plans.

Brussels announced an embargo on Russian oil of up to 90% by the end of the year, with a temporary exception for the Druzhba pipeline (the remaining 10%) which supplies Hungary, Slovakia and Czechia. This embargo caused an increase in oil prices due to a tight world supply. 36% of European oil imports came from Russia and 75% of Russian oil came by ship. If OPEC+ does not increase its production and Chinese demand picks up again this summer, we may well see oil prices rise sharply. It is not certain that this embargo is harmful for Russia, because the fall in volumes is compensated by a rise in prices, but the European Union and the UK have provided an answer to hurt Russia: they have just prohibit insurers from insuring vessels carrying Russian oil, closing the door to Russia's access to the world's largest insurance and reinsurance market at Lloyd's in London.

A major event could ease crude prices: some OPEC members would seek to exclude Russia from the OPEC+ agreement. The North American and European embargo on Russian oil could force Russia to produce less and force Saudi Arabia, the United Arab Emirates and other producers to produce more.

We therefore remain invested in oil and gas stocks, in particular Americans, which are the big winners for the coming months, before other LNG suppliers appear later such as Qatar, Algeria, Australia and Japan.


Disclaimer - Ce document est uniquement à titre d’information et ne peut en aucun cas être utilisé ou considéré comme une offre ou une incitation d'achat ou de vente de valeurs mobilières ou d’autres instruments financiers. Bien que toutes les informations et opinions contenues dans ce document ont été compilés à partir de sources jugées fiables et dignes de foi, aucune représentation ou garantie, expresse ou implicite, n'est faite quant à leur exactitude ou leur exhaustivité. L'analyse contenue dans ce document s’appuie sur de nombreuses hypothèses et différentes hypothèses peuvent entraîner des résultats sensiblement différents. Les performances historiques ne sont nullement représentatives des performances futures. Ce document a été préparé uniquement pour les investisseurs professionnels, qui sont censés prendre leurs propres décisions d'investissement sans se fier indûment à son contenu. Ce document ne peut pas être reproduit, distribué ou publié sans autorisation préalable de PLEION SA.

Global vision

Asset classes - 10 5 22

Long-term macro regime. Towards shorter and risker cycles than in past decades Imbalances, debt, sticky / resilient inflation, and geopolitics argue for more cyclicality and variations in economic cycles

Financial conditions will continue tightening. After plateauing in T4 2021, global liquidity has started to contract in 2022. Higher oil prices and sanctions on Russia (pressuring European banks balance sheets) add to central banks’ action

Stagflation taking-over as the base scenario in 2022. Ultimately, a soft landing remains possible in the US. Europe has little chance to escape recession, like China if it does not rapidly implement a strong fiscal impulse

Geopolitics is back with vengeance. Wars are disruptive and ultimately inflationary. They result in higher risk premium for financial markets

Erratic capital flows. Higher cross-assets’ volatility and wider credit spreads induced forced selling. Markets give signs of oversold conditions. Growing fear is palpable but no capitulation yet

Unstable equity-bonds correlation, but no definitive regime shift. The long-standing regime of negative real rates is under growing test / challenge. Risks of a hard landing restore appeal of duration rich assets

A succession of risk-off / on periods ahead. Forget beta investing, as a nasty combination of fundamental factors will continue next quarters. Unless ¨something¨ breaks in the meantime…


A bad karma - In recent couple of years, the world has clearly had no respite. Perils have followed one another at an unprecedented rate. A persistent pandemic, institutional turmoil in the US, invasion of Ukraine and soaring commodity prices/scarcity shortages. The unhealthy alignment of tragic events is now reaching a critical level. The global landscape has become more hostile to growth and to financial markets.

We must now face the fact that stagflation will persist this year and even next year. This is a particularly difficult environment for the main central banks, which are torn between two contradictory objectives: controlling price slippage (which no one disputes any more) but protecting growth. After deliberately delaying tightening policies, markets are forcing them to pick up the pace. In this context, the risks of a global recession continue to rise. We now estimate them at 50% over the next 12 months. Europe is unlikely to escape, while the US/China still have a chance of a soft landing.

Apart from the special case of China, overinflated property prices, a major vector of the wealth effect, are resisting the rise in interest rates well for the moment. For how long, without this seriously alerting our major decision-makers, and complicating their stated desire to normalize monetary policies?

outright stagflation - 10.5.22

The Chinese economic situation is worrying. Seriously. Residential property and the zerocovid policy are weighing on the short-term outlook. The timid rebound in credit, orchestrated by the central bank, is not benefiting the private sector. In the absence of a much more pronounced and rapid fiscal stimulus, growth will dangerously slow down. A reflation package is likely to come quickly, given the imminence of the 20th Party Congress in November, which is of political interest to the leadership.

Inflation will remain uncomfortably high in 2022 and 2023 for central banks, consumers, and politicians.

The odds of stagflation morphing into recession have significantly increased.

Asset allocation conclusion - Signs of cracks are multiplying. The feverishness of the interest rate markets has now also reached the equity and currency markets. The immense - downward - pressure exerted against the Yen reflects on the one hand the inanity of the extreme monetary policy conducted by the BoJ, but also the shortcomings of international coordination. The fever of agricultural prices and the extreme strength of the dollar, in the middle of a monetary tightening phase, are hurting indebted emerging countries that are major importers of raw materials. Doubts about their solvency will increase. The entrenchment of inflation, which is more serious and deeper than was feared at the beginning of the year, (re)poses the question of investment regimes and
the correlation between major asset classes.



Peak USD may not be far off - It is hard to go against the current USD strength given the continued Fed re-pricing. We caution against extrapolating current trends too far. The Fed may have only started the hiking cycle, but a lot of rate hikes have already been priced in. In addition, the DXY is overvalued based on fair value estimates. Furthermore, a lot of negative news have been priced into the EUR.

The USD continues to trade strongly and looks on track to test a key topside resistance level in the near term. The war in Ukraine drags on and its economic effects will be felt globally. The IMF downgraded global growth for 2022 and significantly raised its inflation forecasts for advanced and emerging economies. The focus is on how aggressive the Fed tightening cycle will be. Market pricing is now expecting 2.60% by year-end.

large fed repricing

Fed officials sound hawkish, with a 50bps hike in May looking like the baseline case and multiple 50bps hikes. This constant re-pricing of the Fed is a key driver behind USD strength. The peak Fed hawkishness may mark the USD top. Past Fed tightening cycles have tended to see the DXY declining following the first hike. Of course, each cycle is different and, while a more aggressive Fed is certainly behind the buoyant USD, there are also other drivers.

Two drivers pertain to the EUR and JPY. First, the conflict in Ukraine has weighed more heavily on the EUR than on any other G10 currency due to the EU greater exposure to the Russian economy, especially its reliance on oil and gas. International sanctions will have a more negative impact on euro area growth, and the inflationary effects of reducing exposure to Russian oil and gas will be more acute. ECB officials continue to talk of raising rates later in the year considering high inflation. President Macron reelection has reduced a source of downside political risk, but the single currency continues to struggle. Any positive resolution to the conflict in Ukraine will spur a relief rally in the EUR towards 1.10–1.12 in the near term. But, by the same token, an extension or escalation of the conflict could also push the EUR weakening below 1.05, especially if the ECB were to lose its enthusiasm for rate hikes.

Secondly, the BoJ commitment to keeping the 0.25% cap on 10-year government bond yields has led to a widening differential with the US. The BoJ confirmed it is comfortable with the current weak yen to reach its inflation goal. Unless the BoJ abandons its yield curve control policy or widens the band, both are unlikely, the yen will stay weak.



Fed rhetoric points for multiple 50bps hikes - Fed Chair Powell backs a 50bps hike at the May meeting. Meanwhile overall Fed rhetoric strongly suggests a string of back-to-back 50bps hikes. The market is pricing almost four straight 50bps hikes at the May, June, July, and September meetings. The hawkish rhetoric from Fed speakers continued with a string of officials calling for the Fed Funds to return expeditiously to neutral or above.

Despite not wanting to comment on market expectations, Powell drew attention to the March FOMC meeting minutes which revealed that many FOMC participants thought it would be appropriate for one or more 50bps hikes at coming meetings. He added that markets are processing what the Fed is saying and reacting appropriately. Fed communication is pointing to a string of 50bps rate hikes in coming meetings. Indeed, Fed officials seem united in returning the Fed Funds to neutral by year-end. Given that the median estimate of neutral at the March FOMC meeting was 2.4%, this implies hikes at each meeting for the rest of 2022. The US 10-year yield is fairly valued. One of the risks for the Fed is coming from the housing market. The 30-year fixed mortgage rate rose to its highest since 2011. Housing activity is easing in response to sharply higher rates.

Is the weaker yen behind the bond market volatility? - The JPY sunk to a 20-year low and is one of the worst performing currencies this year. Much of this weakness has been triggered by a sharp widening in bond yield spreads reflecting the opposite monetary policy stance of the Bank of Japan and the Fed. The former persists with its ultra-loose policy and the latter desires a return to neutrality as soon as possible.

The JPY weakness is raising concern about potential volatility in the US Treasury market. Japan investors are significant Treasury holders having overtaken China as the largest foreign holders in 2019.

Conventionally, a weaker JPY is good for Japanese demand for foreign assets. Certainly, existing Japanese domestic holders of unhedged foreign assets would benefit. However, for new ones into US Treasury there are two concerns: 1) Unhedged investors need to identify the JPY bottom. It is difficult and potentially costly to get wrong. And 2) hedged investors are finding the hedging cost expensive.

Recent BoJ data show that Japanese investors have been trimming their net holdings of US debt since November with over JPY3trn of net sales in February, the most since April 2020. If Japan’s demand for UST weakens as the Fed is shrinking its balance sheet, this could have meaningful implications for the US bond market. However, alternate sources of demand could arise.


No cracking signs within the HY space, surprisingly - High yield segment has been resilient up to now - thanks to solid fundamentals – given the more complicated environment. Fitch US HY default rate projection for 2022 remains at 1.0% despite the increased default activity in March which reached its highest level since July 2020.
Its 2023 default forecast remains at 1.0%-1.5%. One of the reasons is that Russia-Ukraine exposure is low, and issuers have shored up liquidity during the pandemic. Also, higher commodity prices should provide a boost for energy related issuers, which is the largest sector (18%) of the segment according to Markit iBoxx.

However, a prolonged inflationary environment, more hawkish Fed rate hikes and an economic growth slowdown could further stress lower-rated issuers and lead to higher-than-expected defaults in 2023. Some early signs of mounting risks are surfacing. Upgrades are still outpacing downgrades in the segment, but the gap has shrunk. Downgrades just reached their highest level in more than a year.

credit fed vs fed funds

HY yield segment still leaves in La-La Land, while other credit parts have already suffered. The US HY spread is trading close to 375bps i.e. less than 100bps wider than at the start of the year. Since the GFC, each time we experienced an external shock (2012 Euro debt crisis, 2016 US oil bust, 2018 rate hikes and 2020 covid pandemic) HY spreads have sharply widened to trade between 550 and 850 bps. It seems that yield-chasers do not think that the Fed tightening applies to them. In fact, history shows that it applies to HY bonds a lot more than to any other because it will tighten financial conditions. It will make it more difficult for many of these HY-rated companies to refinance with new debt and/or pay off existing debts. The rating agencies default rate forecasts look unrealistic.

Top quality credit spreads have already discounted part of the coming Fed aggressive tightening. High Yield segment is lagging. A sharp catch-up will happen.


Stagflation hangs over stock markets - The shrinking liquidity translates into more volatility. The Covid, the war in Ukraine and the climate emergency offer new opportunities in certain sectors - Since February, everything has accelerated: the Fed, the war in Ukraine, inflation and China with the return of strict confinements weighing again on global supply chains.

The two drivers for stock market growth are higher multiples and/or higher earnings per share. The Covid, then the war in Ukraine, pushes inflation, due to a supply shock, to levels no more observed since the beginning of the 80s. This new inflationary regime has been gradually integrated by the stock markets: for the last year, the PE ratios of indices contracted. The S&P 500’s PER fell from 31x to 21x. In the hyperinflationary period of the 70s, the PER of the S&P 500 was between 13x and 7x! There is therefore theoretically a risk of further contraction of stock market valuations if high inflation were to take hold for a long time. We do not think it will come to that, but what is certain is that in the coming months, the indices will not rise by an increase in multiples.

SnP 500

As for the growth of corporate profits, we will no longer experience the high growth rates of recent years, such as +22% in 2018 with Donald Trump's tax reform and +50% in 2021 with the post-economic recovery. Covid. In 1Q22, the profits of the S&P 500 should grow by 6% and bottom-up analysts expect an increase of around 10% in 2022 both in the United States and in Europe. Despite everything, we note the strong resilience of revenues, profits and margins, which should make it possible to avoid entering a bear market; a scenario that is weakening.

With the rise in interest rates, the equity risk premium has been reduced. Looking at the model on a 14 years period, equities are at their less attractive level on both the earnings yield and the dividend yield.

In a normal economic cycle, sector allocation would now shift to defensive sectors, consumer staples, healthcare, utilities, with the start of a normalization of monetary policy by the Fed. This is what we are doing gradually. For a few years, we had been structurally underweight defensive sectors, with the exception of health stocks during the Covid, in favor of growth stocks, Technology, Communication, disruptive companies, until September 2020, then we were back in the Value segment and cyclical stocks with the Covid vaccination. With the prospect of an economic slowdown, we start to build positions in consumer staples. The good news is the very brief inversion of the yield curve which does not validate the scenario of a recession, from a statistical point of view.

With the Covid, the war in Europe and the climate emergency, we are not in a normal cycle. Covid has shown developed countries its strong dependence on Asian production chains and the need for reindustrialization. The US-China shock, with Taiwan in between, forces a rethinking of production chains in technology. The war in Ukraine has shown Europe its excessive dependence on Russian fossil fuels and above all its weak military capacity. Europe has announced massive investments in its defense, with a major change in doctrine. Meanwhile, the climate emergency will accelerate the energy transition. The United States is in an economy of “war” by investing massively in defense for Europe and Ukraine and considerably increasing its exports of liquefied gas to Europe. Western sanctions against Russia will change the structure of the global energy market.

classic cycle



Oil and gas companies will make a lot of money - Russian invasion of Ukraine will change the energy market. Eventually, Europe will do without Russian fossil fuels, causing Russia to lose its main customer. Gas remains the biggest issue for Europe due to the complexity of transportation. In the short-medium term, there are alternatives with the United States, Norway and North Africa, in particular Algeria and Libya where Italy has excellent relationships, and later with Qatar, Australia and Japan. For Russia, the situation is complex, because all the infrastructure, mainly gas, is oriented from Russia to Europe. China will not be an option in the short term due to transport complexity. Then, China needs to keep strong ties with its Middle Eastern suppliers and Gulf producers are not going to give market share to Russia.

With their huge profits, the oil and gas companies will favor shareholders through share buybacks and a significant increase in dividends. Exxon Mobil has announced plans to triple its share buyback program and Chevron to double it. In the 1st quarter of 2022, Exxon and Chevron generated $17 billion in cash, while they spent only $6.9 billion in capex for production. Important dilemma for Joe Biden who wants to adopt a green environmental policy, while the United States must produce more to help Europe and take market shares left by Russia. The major shift in the global energy market and global rearmament clashes with the climate emergency.

Precious metals at the crossroads – Precious metals, and gold, have stood out from the carnage of the last few weeks and fulfilled their role as de-risked assets. This positive performance is even more remarkable given the headwinds: an extremely strong USD and much higher nominal and real yields. Nevertheless, gold is somewhat of a disappointment. Should not it have ¨exploded¨ in the dramatic geopolitical context prevailing since the invasion of Ukraine and the nuclear risk? We are approaching the epilogue with volatility migrating from bonds to stocks, and then lately to currencies!

gold vs US Dollar


Disclaimer - Ce document est uniquement à titre d’information et ne peut en aucun cas être utilisé ou considéré comme une offre ou une incitation d'achat ou de vente de valeurs mobilières ou d’autres instruments financiers. Bien que toutes les informations et opinions contenues dans ce document ont été compilés à partir de sources jugées fiables et dignes de foi, aucune représentation ou garantie, expresse ou implicite, n'est faite quant à leur exactitude ou leur exhaustivité. L'analyse contenue dans ce document s’appuie sur de nombreuses hypothèses et différentes hypothèses peuvent entraîner des résultats sensiblement différents. Les performances historiques ne sont nullement représentatives des performances futures. Ce document a été préparé uniquement pour les investisseurs professionnels, qui sont censés prendre leurs propres décisions d'investissement sans se fier indûment à son contenu. Ce document ne peut pas être reproduit, distribué ou publié sans autorisation préalable de PLEION SA.

GC Amicitia Zurich won the Swiss Handball Cup final by overcoming Pfadi Winterthur 30-28 after extra time. For the Zurich club, this is the first cup title since the merger of GC and ZMC Amicitia in 2009.

For Petr Hrachovec, the team’s Head Coach: “It was important that we stayed calm, especially in the critical phases, and stuck to our plan.”

According to Andreas Schenk, Investment Advisor - Athletes Wealth Advisory Desk: “It is remarkable to see what this team is able to deliver, despite injuries and limited resources. They demonstrate that with teamwork, willpower and discipline, anything is possible. We from PLEION are proud to be their partner.”

The two teams could also meet in the league’s play-off final, if they both win the upcoming semi-final series.

We are proud to be the sponsors of this incredible team and congratulate them on this achievement.

We wish them all the best for the semi-finals.

Click here to read the communiqué (in German) from GC Amicitia Zurich.

GC Amicitia - Swiss Handball Cup winners

GC Amicitia - Swiss Handball Cup winners - PLEION




A new leader among Swiss wealth managers is born:
PLEION and PROBUS announce their merger.

Sharing the same values and perfectly complementary, PLEION and PROBUS have filed a request for authorisation to proceed with their merger which will bring the newly formed independent Group to around CHF 4 billion of assets under management and 200 employees worldwide, including 60 in Switzerland. Patrick Héritier, currently CEO of PLEION, will take over the management of the new entity in Switzerland, subject to approval by FINMA.

When the two founders and main shareholders of PLEION and PROBUS first met in 2018, it was a simple discussion around a tactical opportunity in Monaco. But Antoine Darioli (PLEION) and Georges de Preux (PROBUS) immediately discovered common values and the same intuition about the exceptional complementarity between their companies and the common future potential.

Both companies have built on four decades of experience in wealth management (PLEION was founded in 1980, PROBUS in 1984) and have developed complementary skills. PLEION is very close to its clients based in Switzerland thanks to its six Swiss offices, a strong expertise in certain asset classes, an IT infrastructure and in-house development of proprietary applications. For its part, PROBUS has developed internationally with, in addition to its headquarters in Geneva, entities in Dubai, Moscow and Bangkok, proven expertise in emerging markets, fund management and private structuring (trusts, estate planning). Between excellence (PLEION in Greek) and integrity (PROBUS in Latin), the new Group's clients will benefit from a proven, efficient and broad spectrum of investment solutions from the outset.

To support this vision, the historical holding company of the PROBUS Group will become the umbrella company of the two groups and will bring together the entities at a global level, including in Switzerland the wealth management company PLEION SA (which will absorb Probus Compagnie S.A., again subject to FINMA approval), the consulting company Probus Advisory S.A. and Probus Trustees S.A. It will have four main shareholders; Georges de Preux and Bernard Bonvin, from PROBUS, and Antoine Darioli and Patrick Héritier, from PLEION, and will be administered by a board represented by them, whose essential function will be to supervise the orientation and development of the future group in Switzerland and abroad.

This joining forces on an equal basis will give the new Group the best possible chance of success, in an increasingly regulated environment.

The merger of PLEION and PROBUS, with its combined assets under management of nearly CHF 4 billion, will create a new leader in wealth management both in Switzerland and internationally.

The transaction remains subject to the approval of FINMA and other competent regulators.


About the new entity :

All group companies will be brought together under the current Swiss holding company Probus Holding SA, while the wealth management company Probus Compagnie SA will be merged into PLEION SA. With over 200 employees, including 60 in Switzerland, the Group will have six offices in Switzerland in Geneva, Bern, Nyon, Sion, Verbier and Zurich, as well as an extensive international presence in Bangkok, Dubai, Luxembourg, Mauritius, Monaco and Moscow through group entities. With nearly CHF 4 billion in assets under management, the Group is a new leader in wealth management in Switzerland and internationally.

On 1 February 2021, PLEION opened an office in Verbier in order to continue to build a close relationship with its clients in Switzerland. Domestic clients are a priority for the Group and represent more than half of the assets under management (CHF 2 billion). With offices in Geneva, Bern, Nyon, Sion, Zurich and now Verbier, PLEION is certainly the independent asset manager established in the largest number of cantons, thus contributing to its unique positioning.


 Serge Dorsaz, Carine Perraudin et Patrick Héritier 

Founded in Geneva more than 40 years ago, PLEION has recently undergone a phase of international (Monaco in 2018) but also national (Bern and Zurich in 2019) geographical growth. The Verbier office is in line with this development strategy.

"Even if the pandemic has changed the way we work by developing virtual relationships with our customers, we are convinced that a physical presence is essential to serve them in the best possible way and maintain a relationship of trust with them," says Patrick Héritier, CEO of the Group.

By moving into the former offices of the Landolt & Co bank in the centre of the village (Rue du Centre sportif 22, 1936 Verbier), PLEION wanted to give its new office a high profile. To run this office, PLEION called upon a Valaisan wealth management expert, Serge Dorsaz, assisted by Carine Perraudin, both ex-Banque Cantonale du Valais and Bruellan. Established for more than 10 years in the "Best Ski Resort in Switzerland" (according to the 2018 World Ski Awards), they are familiar with this demanding HNW clientele and will now be able to offer them all the resources of the PLEION Group (management expertise in all asset classes, consolidation and family office services).


Dear clients, dear friends,

This year, PLEION SA celebrates 40 years of existence. What a long way we have travelled together!

In 1980, PLEION SA was in its infancy, the Iron Curtain still divided the world, China was only the 12th largest economic power in the world and our planet only had 4 billion inhabitants ... but not yet Roger Federer. It is in this world, that seems so distant today, that the visionary founders of Plurigestion SA laid the foundations for what would later become PLEION SA, one of the major players in the Swiss wealth management industry.

The Company has successfully negotiated 4 decades, steered by a client-centric culture and key values such as integrity, trust, excellence, passion and strong convictions.

By way of example, we decided 10 years ago to develop our own portfolio management software, Top Invest, which, at the time, went against the trend to outsource such services. For us, it was essential to keep the development of this tool at the heart of the relationship with our clients, in order to be able to respond with agility and efficiency to their needs.

In addition, unlike most independent asset managers, last year we chose to be regulated directly by FINMA, the Swiss Financial Market Supervisory Authority. This means more discipline for us in terms of compliance and governance, and we are convinced that this is your assurance of our professionalism.

Over the last 40 years PLEION SA has grown considerably and now has more than 40 employees in Switzerland, dispersed between offices in Geneva, Nyon, Sion, Bern and Zurich. Drawing on the famous Swiss know-how, our Group also has multidisciplinary and international skills, notably thanks to its presence in Monaco, Mauritius and soon Luxembourg.

Growing up has never been an end in itself; it is a way to expand our range of services and solutions. To become better is the Greek etymological meaning of the name PLEION. Thus, we will continue to develop additional competencies, strengthen our partnerships, and develop new ones in order to always serve you better.

On behalf of all PLEION SA employees, who strive every day to merit your trust, we profoundly thank you for the privilege of having you amongst our clients.


Marc Wagner                                       Patrick Héritier
Chairman                                              Chief Executive Officer


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The different asset classes are relatively well valued or expensive.

Where should we invest? Which asset class, region or sector should we overweight or underweight? Economists and strategists have many valid arguments about whether they see the glass as half-empty or half-full.

China is a good example. I meet many asset managers who tell me to avoid China at all costs – trade war with the US, currency under pressure, etc. However, I meet the same amount of managers who see China as a prime region to invest in – 6% growing GDP, shift from industrial export to inland services, and so on.

As CIO, it is sometimes difficult to be strongly underweight or overweight when these choices make a significant difference towards the future performance of our portfolios.

In this context, instead of affixing to a benchmark, which has been effective ever since the massive intervention of central banks, we seek alpha from macro managers whose playing field is the same as ours: liquid assets, stocks, bonds, currencies, etc.

To avoid only choosing one or two managers who are doing well, we diversify between eight and 12 different macro discretionary managers.


Historical highs

We have invested in the Picard Angst Strategic Allocation fund, which selects balanced managers who have above- average past performances and the ability to return to their historical highs after a market correction.

This is mainly due to their willingness to manage their portfolio in terms of profit and loss rather than relative to a benchmark, since they use the 50/50 benchmark for informational purposes rather than for generating ideas or risks.

During the fund selection process, it was interesting to note that very few balanced funds had returned to their highest levels.

Even if we manage our portfolios dynamically and our clients have real-time access to their performances, our target is to invest over the long term and for future generations.

This type of strategy has led us to realise that well-recognised products from well- established banks have had a return of 2% per year over the past 12 years versus the 4% return of the benchmark, while asset managers could get around 5-6% over the same period.

The difference appears when markets become particularly volatile.

Central bankers and politicians remain creative and interventionist, but their reserves are decreasing. Constant negative interest rates are unsustainable over the long term.

A readjustment is expected over the next two or three years. So, investing in a fund of funds, the managers of which have a different view of the future but have the desire to preserve capital, makes sense today.


This article was originally published in the November issue of the Citywire Switzerland magazine with the contribution of Mr. Benoît Derwael .

PLEION is appointing Sandro Steiner as the head of its newly-opened Zurich office, has learned. The private banker spent the last six years running an UBS desk for super-rich non-domiciled emerging market clients in the U.K.

Steiner also developed a global resident partners desk for UBS which tended to clients moving country. His hire, effective November 1, comes one month after PLEION hired Mark Staudenmann as the deputy head for its Zurich office.

Staudenmann spent the 26 years at UBS, where he was most recently a senior client advisor for Asian clients. He also spent several years running UBS' Asia international desk in Hong Kong. Pleion confirmed both hires.

Ambitious Targets

CEO Patrick Heritier opened PLEION's Zurich office last month, in a bid to focus on Swiss as well as international clients, in particular from Asia, he told The new offices are a bid to lift PLEION’s assets from German-speaking Switzerland to more than $1 billion.

The independent Genevan asset manager is one of many seeking growth in Zurich – Mirabaud, Lombard Oder, and Pictet have also reinforced ranks recently. PLEION is also looking at dealmaking to bolster its $1.5 billion asset base, as reported in April.

PLEION is opening a Zurich office to focus on Swiss as well as international clients, with emphasis on Asia, CEO Patrick Heritier told The new offices are a bid to lift PLEION’s assets from German-speaking Switzerland to more than $1 billion.

The independent Genevan asset manager is one of many seeking growth by spilling over the «roesti ditch», an imaginary but highly symbolic border between Switzerland's German- and French-speaking regions. PLEION is also looking at dealmaking to bolster its $1.5 billion asset base, as reported in April.

Enlisting UBS Vet
Heritier said he has already hired two people in Zurich, and is looking to add more. «Sharing our vision and a cultural fit are key in our hiring process,» Heritier said. Last month, Marc Wagner, a long-standing UBS banker to the ultra-rich, joined its board to help its strategy in German-speaking Switzerland.

«Our plan over five years is to have a similar operation in the German-language region as we do in the French,» Heritier said. «We intend to grow, and given the interest we see in the market, we might be quicker than originally planned.»

PLEION Monaco Break-Even
The privately-held wealth manager also earlier this year opened an office in Monaco, where it employs 10 people and expects to break even by mid-2020. Heriter, a veteran of UBS and Julius Baer, has rapidly expanded PLEION since taking over two years ago


Click here to read the article from FINEWS.

Geneva, March 2019


As 2019 gets underway, it is with strong enthusiasm, great motivation, energy and pride that we wish to inform you about important developments concerning our company.

Today's world witnesses rapid and profound changes to which we have to adapt. We therefore focus our efforts on the modernisation of the group’s various activities and on the globalisation of our services.

In concrete terms, we have:

Standardised our identity by creating the brand PLEION to oversee all our different activities. In this way, we will establish our worldwide presence under a single designation. PLEION means “excellence” in Greek and is the symbol of our proximity and our promise to you.

Strengthened our international presence by strategically extending our operations to Monaco and through the opening of a branch in Bern. We want to be closer to our customers, our only focus.

Reinforced our investment office through the appointment of Mr. Benoît Derwael as CIO in 2018. We now benefit from the excellent and indubitable know-how of a proven expert and are able to act internationally with confidence.

These measures will enable us to further improve our performance, therefore contributing to our shared success.

We thank you for the trust you have placed in us and for our great collaboration. It is a privilege to be able to work with you.


Patrick Héritier

Chief Executive Officer


Rue François-Bonivard 12, 1201 Genève
t +41 22 906 81 81, f +41 22 906 81 82

Rue du Centre Sportif 22, 1936 Verbier
t +41 27 329 06 83

Chemin du Midi 8, 1260 Nyon
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t +41 43 322 15 80

Rue Pré-Fleuri 5, 1950 Sion
t +41 27 329 00 30, f +41 27 329 00 32 

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