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Please be advised that future verbal and written communications from the bank may be in English only. These communications may include, but are not limited to, account agreements, statements and disclosures, changes in terms or fees; or any servicing of your account.

Por favor, tenga en cuenta que es posible que las comunicaciones futuras del banco, ya sean verbales o escritas, sean únicamente en inglés. Estas comunicaciones podrían incluir, entre otras, contratos de cuentas, estados de cuenta y divulgaciones, así como cambios en términos o cargos o cualquier tipo de servicio para su cuenta.

Informamos que as futuras comunicações do banco, verbais e escritas, podem estar disponíveis apenas em inglês. Essas comunicações podem incluir, entre outras, acordos de conta, extratos de conta e divulgações, alterações aos termos ou tarifas, ou qualquer tipo de serviço pertinente à sua conta.

仅此通知,本行即日起发出的口头及书面通信可能将只提供英文版本。这些通信可能包括但不限于账户协议,账单和通知,条款或费用变更;或任何为您账户提供的服务。

Please be advised that future verbal and written communications from the bank may be in English only. These communications may include, but are not limited to, account agreements, statements and disclosures, changes in terms or fees; or any servicing of your account.

Por favor, tenga en cuenta que es posible que las comunicaciones futuras del banco, ya sean verbales o escritas, sean únicamente en inglés. Estas comunicaciones podrían incluir, entre otras, contratos de cuentas, estados de cuenta y divulgaciones, así como cambios en términos o cargos o cualquier tipo de servicio para su cuenta.

Informamos que as futuras comunicações do banco, verbais e escritas, podem estar disponíveis apenas em inglês. Essas comunicações podem incluir, entre outras, acordos de conta, extratos de conta e divulgações, alterações aos termos ou tarifas, ou qualquer tipo de serviço pertinente à sua conta.

仅此通知,本行即日起发出的口头及书面通信可能将只提供英文版本。这些通信可能包括但不限于账户协议,账单和通知,条款或费用变更;或任何为您账户提供的服务。

Sitting-in-the-waiting-room

Perspectives

Sitting in the waiting room

Steven Wieting

By Steven Wieting

Chief Investment Strategist and Chief Economist

September 29, 2020Posted InFixed Income, Investment Strategy and Equities

The US election and COVID’s winter impact are reasonable catalysts for more volatile markets in the next few months. There are no immediate answers to what either will bring. However, we expect neither to generate challenges close to as large as the initial COVID shock. 


The US election and a potential winter COVID surge won’t dominate global returns in the next 12-18 months. More likely, COVID’s eventual departure will have a profound, mostly positive impact (though negative for certain “COVID defensive” assets). 


Cyclical, income-generating global equities are reasonably valued and poised for recovery. Global bonds – including high yield and emerging markets – now yield about 1%. Safe-haven bonds remain particularly rich, with both US bonds and cash negative yielding in real terms. We can’t recommend reallocating to these for within our medium-term asset allocation framework because of near-term uncertainties.

 
If one believes the US election result will yield unified Democrat control of government, knowing how aggressively and expansively it will pursue tax increases early in an economic recovery would still require significant knowledge of the composition of the new US congress. 


History suggests tax policy uncertainty ahead of a potential change in leadership will manifest significantly in the pre-election period. We don’t believe historical precedent should be relied upon in the present setting, but 1-year US equity returns following the election of a Democrat US President since WWII have averaged +14.3%. 


In our view, concerns about US taxation merely amplify the existing diversification argument for global equities, which have lagged behind US markets in both performance and valuation. 


For those concerned with the near-term, hedging is an option. This isn’t cheap in the equities asset class generally with implied volatility rising though US election day and the month beyond. Credit market hedging may “overlap” the same risks more cost effectively. 


In a deeply negative real yield world, building fixed income portfolios around higher yielding strategies is becoming ever more important for investors to outpace inflation. Though this may require increasing risk around high quality core assets, aggressive central bank easing is expected to provide support.

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