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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.

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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。

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Perspectives

The G2 world unfolding before us: the US and China right now

David Bailin

By David Bailin

Chief Investment Officer

August 6, 2020Posted InFixed Income, Investment Strategy and Equities

For decades, the performance of the S&P 500 and levels of unemployment have been used to forecast US Presidential elections. The track record of each model is solid as the S&P 500 and employment have generally moved together. And yet, as we move towards the November election, we can be certain that one of these indicators will be wrong. With small data sets, like Presidential elections, the risk of following any specific model or polls is real. Just look at 2016.

At the beginning of 2020, the US economy was strong and therefore favorable for the re-election of President Trump. However, the blunt economic impact of Covid-19 and the federal government’s controversial and inconsistent health policy responses to the pandemic have flipped the Electoral probabilities for November.

Since the virus first emerged in the United States in January, weekly jobless claims leapt by more than 3000% to as high as 6.9 million. Even this past week’s figure of 1.4 million is still double the highest level seen in the 2008 financial crisis. The unemployment rate, the most commonly referenced indicator, tripled in one-month from 4.4% in March to 14.7% in April, with only a partial recovery through June. With levels of infections at extraordinary rates in much of the US, it is unlikely there will be a dramatic further reduction in unemployment before the election. 

Looking at the stock market, one sees a completely different picture. In fact, viewed on the basis of the performance of technology stocks in particular, or the S&P 500 generally, one could argue that the government response to the pandemic has been highly effective. We have written previously that the passage of the CARES Act and the Federal Reserve’s full commitment to markets and business provided an initial bridge over a deep chasm. The fact that these actions took place at a time of deep divisions within government could be considered a great success. But polling data suggests the President is receiving little credit for this.

This year, polling currently favors the employment model rather than the stock market model for ascertaining political fortunes. The crucial question is “Are you better off today than you were four years ago?” This depends largely on whether someone is an investor, a small business owner, or an employee of a deeply impacted sector.  Investors exposed to a handful of stocks are likely to be very satisfied. “Covid-defensive” companies have been net beneficiaries of the acceleration of favorable business trends, like digitization. But for many furloughed employees, small business owners, or concentrated investors in many industries, it is hard to see how they would not answer the “better off” question negatively. On Thursday, 2Q GDP was released, showing a 33% annualized economic decline and a correspondingly large increase in the so-called “output gap”.

Read: CIO Strategy Bulletin.