What to make of the Fed's latest U-turn - J. Safra Sarasin€¦ · What to make of the Fed’s...

Cross-Asset Weekly 01 February 2019

1 | Cross-Asset Weekly

What to make of the Fed’s latest U-turn

Financial markets have rallied following the Fed’s surprisingly dovish statement on Wednesday. It has dropped its forward guidance on further rate hikes and has indicatedthat the balance sheet will remain large. This has raised expectations that the currentFed Funds rate of 2.5% could mark a cyclical high. Looking at past cycles, we find that if this were the case, we would expect a further rally in US-Treasury bonds. However, we do not think that the economic outlook warrants such a dovish stance. Strongerglobal growth in the second half of the year and higher US core inflation should ulti-mately force the Fed to resume its hiking cycle. This would lead to a re-pricing of rate expectations, possibly wrong-footing markets. Equity markets have now more than adequately priced the Fed’s advertised “patience”in tightening policy in 2019. We thus advise to wait for better entry levels which arelikely to pave the way for a lasting recovery in 2Q 2019. We are in no hurry to buy euroarea equities, given weak liquidity, earnings and technical signals too. This week’s highlights

US Macro 2The Fed has bowed to markets

US Fixed Income 4Pause or peak?

Global Equity 6Beware of Fed euphoria and keep your powder dry

Economic Calendar 8Week of 04/02 – 08/02/2019

Market Performance 9Global Markets in Local Currencies

Contacts Dr. Karsten Junius, CFA Chief Economist [email protected] +41 58 317 32 79 Raphael Olszyna-Marzys International Economist [email protected] +41 58 317 32 69 Cédric Spahr, CFA Equity Strategist [email protected] +41 58 317 31 28 Alex Rohner Fixed Income Strategist [email protected] +41 58 317 32 24 David Rees Emerging Market Strategist [email protected] +41 58 317 51 36 Kunal Singh, CFA Emerging Market Credit Analyst [email protected] +41 58 317 31 21 Thilina Hewage, CFA Emerging Market Credit Analyst [email protected] +65 6230 66 61 Walid Bellaha Emerging Market Credit Analyst [email protected] +41 58 317 51 57



US Macro

The Fed has bowed to markets

The FOMC’s January statement couldn’t have been more accommodative: the Fed dropped its forward guidance on further rate hikes and indicated its balance sheet will remain large. We do not think the outlook has changed enough to warrant this dovish turn. Stronger global growth in the second half of the year and higher US core inflation could force Mr. Powell to change his tone once again as we ap-proach the middle of the year, possibly wrong-footing markets.

The Fed kept rates unchanged on Wednesday, as expected, but made significant dovish changes to its communication. This stands in stark contrast to the December meeting, when Mr. Powell’s hawkish comments led to a sharp sell-off in risk assets as investors feared the Fed would overtighten. So what has changed? First, in its communication the Fed removed the wording saying it “judges that some fur-

ther gradual increases” in rates were merited. Instead, it was replaced by: “in light of

global economic and financial developments and muted inflation pressures, the Commit-

tee will be patient as it determines what future adjustments to the target range for the

federal funds rate may be appropriate to support these outcomes”. The Fed’s forward guidance merely asserts that it is in a wait-and-see approach. Second, the Fed made a U-turn on its balance sheet policy. Up until December, it ar-gued that the adjustment in the size of its balance sheet was on “autopilot”: it would gradually shrink as maturing assets it bought under its QE programs would not be re-placed. Mr Powell appeared to have spooked investors during the December press con-ference when he said the balance sheet "will be substantially smaller than it is now”. But on Wednesday, the FOMC argued that it will maintain “indefinitely its current

framework for setting interest rates, with the ultimate size of the balance sheet driven

principally by financial institutions’ demand for reserves” (commercial bank's holdings of deposits in accounts with the Fed). Simply put, the balance sheet will remain much larger than thought only six weeks ago. The Fed also reassured markets that it was will-ing to adjust its policy of winding down its crisis-era stimulus programme if the econo-my deteriorates. Chairman Powell argued that economic conditions had evolved, justifying these chang-es: global growth and its outlook have softened further, financial conditions have tight-ened considerably, while political uncertainty – both at home and abroad – remains high and inflation muted. In addition, he argued that “the case for raising rates has

weakened somewhat. The traditional case for rate increases is to protect the economy

from risks that arise when rates are too low for too long, particularly the risk of too-high

inflation. Over the past few months, that risk appears to have diminished. Inflation read-

ings have been muted, and the recent drop in oil prices is likely to push headline infla-

tion lower still in coming months. Further, as we noted in our post-meeting statement,

while survey-based measures of inflation expectations have been stable, financial market

measures of inflation compensation have moved lower. Similarly, the risk of financial im-

balances appears to have receded, as a number of indicators that showed elevated lev-

els of financial risk appetite last fall have moved closer to historical norms.”

Raphael Olszyna-Marzys International Economist [email protected] +41 58 317 32 69

The Fed turned dovish in January

The FOMC statement no longer points to “some further gradual increases” in rates

And the Fed’s balance sheet will not shrink substantially, as it previously indicated

Chairman Powell argued that the changes reflect new economic conditions



We expected some changes to the language. Forward guidance seems like an oxymoron if the central bank is truly data dependent. Yet we were surprised that the overall bias towards further tightening was entirely dropped. In addition, we are not convinced by the explanation. The Fed’s basic outlook for the US economy remains fairly construc-tive, while all of the economic and political cross-currents that were mentioned were al-ready evident last quarter. Mr. Powell’s comments about macro-financial imbalances appear somewhat odd. Headline inflation and market measures of inflation expecta-tions have fallen in line with lower energy prices. Yet the oil price has already recovered by 20% since the start of year. What’s more, the base effect from the previous drop in energy prices on headline inflation will fade out as we get into the second half of the year. Finally, besides higher volatility financial imbalances haven’t fundamentally changed, with US equities back up to their pre-December correction. Last year, the Fed failed to convey the message that it would be increasingly data de-pendent. But the pendulum appears to have swung too far in the other direction, with its communication providing a false sense of certainty that interest rates will be on hold for the foreseeable future. We expect external weaknesses and political uncertain-ty to be somewhat less pronounced in 2H: a stronger Chinese economy should support to some extent global growth, and uncertainties with regards to US-China trade ten-sions and Brexit are likely to abate, at least for some time. More importantly for Fed policy, domestic wage growth and core inflation should continue to move higher (Exhib-its 1-4). As a result, Mr. Powell will have to change tack again as we approach the mid-dle of the year, possibly wrong-footing markets and causing another bout of volatility.

But we are not convinced by his explana-tion

The Fed might have to do yet another U-turn as we approach the middle of the year

Exhibit 1: The unemployment rate is likely to remain low Exhibit 2: Wages should rise further

Source: Datastream, J. Safra Sarasin, 31.01.2019 Source: Datastream, J. Safra Sarasin, 31.01.2019

Exhibit 3: Negative impact from energy prices will dissipate in 2H Exhibit 4: Core inflation to move higher

Source: Datastream, J. Safra Sarasin, 31.01.2019 Source: Datastream, J. Safra Sarasin, 31.01.2019

3.0

4.5

6.0

7.5

9.0

10.5

-2

-1

0

1

2

3

1990 1994 1998 2002 2006 2010 2014 2018

US heavy truck sales (adv. 6m, inverted)US initial jobless claims (adv. 6m)CB Consumer Conf. - business conditions ("bad" less "good") (adv. 4 months)US unemployment rate (RHS)

Dev. from mean (standard deviations) Per cent of labour force

0.51.01.52.02.53.03.54.04.55.05.5

-4

-3

-2

-1

0

1

2

3

1990 1994 1998 2002 2006 2010 2014 2018

NFIB survey - % raising compensation, advanced 9mConf. Board - 6m consumer income expectations, advanced 6mJOLTS quits rate, advanced 6mMedian of four wage growth measures

Standard deviations from average 3mma, 12m change (%)

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

CPI food & energy (contribution to headline inflation rate, %pts)

JSS model

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Core CPI JSS model



US Fixed Income

Pause or peak?

The Fed has taken a significantly more accommodative stance than before, raising expectations that the current Fed Funds rate will mark a cyclical high. Looking at past cycles, this would pave the way for a rally in bonds. However, we believe that the Fed will resume its hiking cycle by mid-year, leading to a re-pricing of ex-pected rates. Still, given that we are at a late stage in the rate cycle, we would expect long-term US bond yields to mark their top not far above current levels.

Within a short period of time the Fed has moved to a significantly more flexible policy approach where it can adjust monetary policy as appropriate, including rate cuts if nec-essary. The pace of balance sheet run-off, which has been on ‘autopilot’ until now, will also be flexible if necessary. The Fed is acknowledging the marked slowdown in growth outside the US and is mindful of the potential spill-over effects from financial markets to the real economy. Consequently, the Fed is likely to be on hold while it assesses the impact of its past policy tightening on the US economy, and to see whether there is tangible improvement in global growth, namely in Asia and Europe. Judging by current implied forwards, markets have not only priced-out any future rate hikes, they even expect a rate cut this year. “The Fed never pauses, it cuts” so goes the saying, hence the significant change in language has led market participants to be-lieve that the current Fed Funds rate of 2.5% will mark the cyclical high. We have con-sistently argued that, historically, the cyclical highs in bond yields have been marked by the level reached with the last rate hike in a cycle. Looking at past comparable rate cy-cles, there is indeed a clear pattern for the behaviour of nominal bond yields. They usually converge toward the terminal policy rate. Within 2 to 3 months after the final hike, yields across the curve start to fall in an almost parallel fashion below the Fed Funds rate (Exhibits 1,2) and only well into the ‘pause’ does the curve start to steepen.

From that point of view, the current downward pressure on bond yields is a repeat of past end of cycle moves with the exception that currently, the yield curve is not invert-ed across the maturity spectrum. If we were indeed of the opinion that the current level of Fed Funds is the top of the cycle, we would argue for a rally in bonds.

Alex Rohner Fixed Income Strategist [email protected] +41 58 317 32 24

A more accommodative Fed than expected

Pause or peak?

Exhibit 1: US rate hike cycle from 1999 to 2001 Exhibit 2: US rate hike cycle from 2003 to 2006

Source: Bloomberg, J. Safra Sarasin, 31.01.2019 Source: Bloomberg, J. Safra Sarasin, 31.01.2019

2.0

3.0

4.0

5.0

6.0

7.0

01.12.1998 01.09.1999 01.06.2000 01.03.2001 01.12.2001

Fed Funds Rate (r.h.s) 30y US Treasury yield (%)10y US Treasury yield (%) 5y US Treasury yield (%)2y US Treasury yield (%)

3.0

3.5

4.0

4.5

5.0

5.5

01.2005 10.2005 07.2006 04.2007 01.2008

Fed Funds Rate (r.h.s) 30y US Treasury yield (%)10y US Treasury yield (%) 5y US Treasury yield (%)2y US Treasury yield (%)



We still expect the US economy to carry significant momentum into 2019, largely driven by domestic consumption as the labour market is tight and wage growth remains healthy. Although the pace of GDP growth is moderating, we expect more significant weakness only in H2 2020. Importantly, the global economy should stabilise in H2 2019 as Chinese stimulus measures will contribute more positively to global growth. The latest mortgage application and home sales data in the US are not yet indicative of an overly tight monetary stance. We therefore expect the Fed to resume its hiking cycle by mid-2019 with two more rate increases. We believe that rate expectations are currently too low given our scenario and markets will have to adjust accordingly. However, over the next few months, economic indicators from China and Europe will continue to be weak while the US economy will show signs of moderation. This will leave the US fixed income markets trying to gauge the likeli-hood of an end of cycle scenario, with tentative pushes of the front-end below the Fed Funds rate with a steepening bias for the yield curve. For a sustained and significant move lower in rates from here, we would have to see a clear and substantial decelera-tion in US economic indicators, which we do not expect. However, we will need more tangible signs of an improvement in Chinese economic leading indicators for the mar-kets to re-price the expected path of short-term interest rates. Still, given that we are at a late stage in the US-rate cycle and that we forecast a moderating US growth profile for this year and next, we would expect long-term treasury yields to mark their cyclical top at around 3%, not far above current levels.

US rate hike cycle to resume…

… but long term US rates to mark their top not far above current levels



Global Equity

Beware of Fed euphoria and keep your powder dry

Equity markets have now more than adequately priced the Fed’s advertised “pa-tience” in tightening policy in 2019. While 4Q 2018 US company figures look ro-bust so far, we expect a top in early February and ensuing pullback into early March. We thus advise to wait for better entry level which are likely to pave the way for a lasting recovery in 2Q 2019. We are in no hurry to buy euro area equi-ties, given weak liquidity, earnings and technical signals too.

The Federal Reserve added the icing on the cake on 30 January by stressing that it would remain patient in considering future rate increases. Our economists expect the Fed to tighten rates twice this year, starting around mid-year. While this opens a win-dow of opportunity for risky assets in the first half of 2019, we also see short-term signs of exuberance suggesting that the air has become thin for equity markets. Fed fund futures price no rate hike in 2019 and the upward momentum in US equities has got ahead of itself in the short-term, probably accentuated by short covering (Exhibit 1). Global equities still face the headwind of a slowdown in economic indicators – at least outside the US, while liquidity conditions both in terms of M1 growth and central banks’ balance sheets remain weak (see last week’s article Scarce M1 liquidity por-

tends some weakness in 1Q 2019 in the Cross-Asset Weekly of 25 January). We thus expect a pullback to take place between mid-February and early March and would not be chasing equity markets at current levels. We would buy shares during this likely pe-riod of weakness, as our leading indicator of monetary conditions revels a strong likeli-hood of an ensuing rally into late 2Q 2019 (Exhibit 2). About one third of US companies have reported their figures for 4Q 2018 and their numbers confirm a robust picture for US economic growth. Our provisional figures for the S&P 500 shows that 60% of companies beat sales expectations and 74% exceeded forecasted profits (Exhibit 3). Information technology and industrial companies main-tained a high frequency of earnings beats, another evidence of robustness in the US stock market. Some US companies most exposed to Asian economies missed sales/earnings expectations (e.g. Nvidia, Caterpillar, Intel), yet the losses remained contained and did not spread to other stocks in the same industries. This lack of nega-tive overreaction underscores that US equities are building a medium-term base.

Cédric Spahr, CFA Equity Strategist [email protected] +41 58 317 31 28

US rate hike expectations now too low

Monetary conditions indicator hint at “risk-on” period in 2Q 2019

Robust 4Q 2018 figures for US companies, yet with slackening momentum

Exhibit 1: US equities probably price too little US monetary tight-ening in 2019, after an ebullient January rally

Exhibit 4: Our gauge of US monetary policy tightness portends arisk-on period going into mid-year, due to start in late 1Q19

Source: Datastream, J. Safra Sarasin, 30.01.2019 Source: Bloomberg, J. Safra Sarasin, 31.01.2019

-0.2

0.0

0.2

0.4

0.6

0.8

2'200

2'400

2'600

2'800

3'000

Jul 2018 Okt 2018 Jan 2019

S&P 500

Fed rate hike expectations for 2019 in % (rhs)

-3

-2

-1

0

1

2

3

4

5

-100

-50

0

50

100

2002 2006 2010 2014 2018

S&P 500, yoy in %

Monetary accommodation (18M lead; rhs)



We also found evidence suggesting that many investors used the January short-covering rally as an opportunity to sell share after having been “shell-shocked” in De-cember. Our measure of ETF money flows for major US index ETFs turned negative in January (Exhibit 4), with net selling being more particularly visible for materials, tech-nology, and financials ETFs. Such signs of risk reduction indicate that many investors are staying on the sidelines and might come back as buyers by late 1Q19 when eco-nomic conditions stabilize. We finally turn our attention to the euro area. The economic outlook for the first half of 2019 looks somewhat downbeat and the outlook for 4Q 2018 figures look less inspir-ing than in the US, especially when it comes to earnings beats. Our macro liquidity in-dicator for the euro area still indicates unattractive liquidity conditions, while the BAML fund manager survey reveals that international investors increased their underweight position in euro area equities in January 2019. Money flows into European equity ETFs were unimpressive with the exception of a one-week jump at the start of the year, probably the result of portfolio reallocation. Our short-term sentiment indicator for the Euro Stoxx 50 index has finally elevated levels indicating with great likelihood that a short-term top for European indices should materialize in the first week of February. As previously noted for US equities, we would wait for better entry points to buy euro area equities, looking to re-enter the market by late February / early March.

Exhibit 3: US company delivered good earnings for 4Q 2018, yetthe frequency of earnings exceeding expectations is declining

Exhibit 4: US equity investors sold ETFs on a large scale in Janu-ary, obviously mistrusting the current rally

Source: Bloomberg, J. Safra Sarasin, 31.01.2019 Source: Bloomberg, J. Safra Sarasin, 31.01.2019

Investors took money out of ETFs during the January rally

Flows, sentiment and macro liquidity re-main uninspiring for euro area equities

Exhibit 5: Exhibit 6:

Source: J. Safra Sarasin, 31.01.2019 Source: J. Safra Sarasin, 31.01.2019

0

20

40

60

80

100

EPS miss in % EPS beat in %-10

-8

-6

-4

-2

0

2

4

6

8

10

1'600

1'800

2'000

2'200

2'400

2'600

2'800

3'000

3'200

Jan 2016 Jul 2016 Jan 2017 Jul 2017 Jan 2018 Jul 2018 Jan 2019

Net inflows (4W avg; rhs)

S&P 500 index

0.0

0.2

0.4

0.6

0.8

0

1'000

2'000

3'000

4'000

5'000

6'000

2000 2005 2010 2015

Euro Stoxx 50Euro area macro liquidity indicator (rhs)

0

20

40

60

80

100

2'500

3'000

3'500

4'000

4'500

2017 2018 2019

Euro Stoxx 50

Short-term sentiment indicator (rhs)



Economic Calendar

Week of 04/02 – 08/02/2019

Country Time Item Date Unit Consensus

Forecast Prev.

Monday, 04.02.2019 CH 10:00 Total Sight Deposits Feb 1 CHF bn - 576.7EMU 11:00 PPI Dec yoy - +4.0%US 16:00 Durable Goods Orders, final Nov mom +1.7% +0.8% 16:00 Capital Goods Orders, final Nov mom +0.1% -0.6% 00:00 Personal Income Dec mom +0.5% +0.2% 00:00 Personal Spending Dec mom +0.3% +0.4% 00:00 Personal Consumption 4Q18 qoq +3.8% +3.5% 00:00 GDP Annualized 4Q18 qoq +2.6% +3.4% 00:00 GDP 4Q18 qoq +1.7% +1.8%

Tuesday, 05.02.2019 DE 09:55 PMI Services, final Jan index - 53.1UK 10:30 PMI Services Jan index - 51.2US 15:45 PMI Services, final Jan index - 54.2 16:00 ISM Non-Manufacturing Jan index 57.5 57.6 00:00 Retail Sales Advance Dec mom +0.1% +0.2% 00:00 - Less Auto Dec mom +0.1% +0.2% 00:00 Housing Starts Dec 1 000 1250 1256 00:00 Building Permits Dec 1 000 1290 1328 00:00 Wholesale Inventories, prel. Dec mom - - 00:00 New Home Sales Dec 1 000 575 - 00:00 Durable Goods Orders, prel. Dec mom +1.7% - 00:00 - Less Transportation, prel. Dec mom +0.2% - 00:00 Capital Goods Orders, prel. Dec mom +0.1% - 00:00 Factory Orders Dec mom - -

Wednesday, 06.02.2019 US 13:00 MBA Mortgage Applications Feb 1 % - -3.0%

Thursday, 07.02.2019 UK 09:30 Halifax House Prices Jan yoy - +1.3%

Friday, 08.02.2019 JP 00:50 Bank Lending Jan yoy - +2.4% 00:00 Eco Watchers: Current Jan index - 48.0DE 08:00 Imports Dec mom - -1.6%US 00:00 Wholesale Inventories, final Dec mom - -

Source: Bloomberg, J. Safra Sarasin



Market Performance

Global Markets in Local Currencies

Government Bonds Current value Δ 1W Δ YTD TR YTD in %

Swiss Eidgenosse 10 year (%) -0.25 -7 0 0.5

German Bund 10 year (%) 0.16 -4 -9 1.0

UK Gilt 10 year (%) 1.22 -9 -6 0.5

US Treasury 10 year (%) 2.63 -13 -5 0.7

French OAT - Bund, spread (bp) 41 0 -6

Italian BTP - Bund, spread (bp) 246 0 -4

Spread over govt bonds

Change in credit spread Credit in-

dex

Credit Markets (bp) Δ 1W Δ YTD TR YTD in %

US Investment grade corp. bonds 66 -6 -22 2.4

EU Investment grade corp. bonds 70 -4 -17 1.7

US High yield bonds 353 -22 -97 4.4

EU High yield bonds 306 -14 -46 2.4

Stock Markets Level P/E ratio 1W TR in % TR YTD in %

SMI - Switzerland 8'969 14.6 0.4 6.4

DAX - Germany 11'173 12.0 0.4 5.8

MSCI Italy 670 9.7 1.2 7.8

IBEX - Spain 9'057 11.5 -0.8 6.6

DJ Euro Stoxx 50 - Eurozone 3'159 12.5 1.2 5.6

MSCI UK 2'015 12.3 2.2 3.7

S&P 500 - USA 2'704 16.1 2.4 8.0

Nasdaq 100 - USA 6'907 18.9 3.1 9.2

Nikkei 225 - Japan 20'788 15.1 1.0 3.8

MSCI Emerging Markets 1'050 12.0 3.0 8.8

Forex - Crossrates Level 3M implied volatility

1W in % YTD in %

USD-CHF 1.00 6.1 0.2 1.4

EUR-CHF 1.14 4.8 0.6 1.2

GBP-CHF 1.31 10.0 -0.5 4.2

EUR-USD 1.14 6.5 0.3 -0.2

GBP-USD 1.31 10.7 -0.7 2.8

USD-JPY 109.0 7.1 -0.5 -0.7

EUR-GBP 0.87 9.6 1.0 -2.9

EUR-SEK 10.36 5.7 0.5 2.1

EUR-NOK 9.67 5.9 -0.4 -2.4

Commodities Level 3M realised

volatility 1W in % YTD in %

BBG Commodity Index 81 14.1 -0.4 5.2

Brent crude oil - USD / barrel 61 38.1 -0.8 14.1

Gold bullion - USD / Troy ounce 1'317 8.3 0.9 2.7

Source: J. Safra Sarasin, Bloomberg


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Explanatory notes regarding the analysis: Insofar as factual information and the opinions of third parties (interpretations and estimates) are presented, the relevant sources are indi-cated. Our own value judgments (projections and forecasts) which reflect the outcome of work undertaken by the Bank's Research depart-ment, are not expressly marked or indicated. The substantive principles and benchmarks underlying our own value judgments are set down in our research methodology principles. In producing the research the following valuation principles and methods were applied: Economic & Strategy Research Economic & Strategy Research uses proprietary models to formulate its own projections of economic growth, inflation, unemployment rates, government budget balances and foreign trade balances. Based on the macroeconomic scenario, the strategists for the three asset classes work up their forecasts for (a) the stock markets, (b) short- and long-term interest rates, and (c) the major currencies. In addition to the macroeconomic variables, Economic & Strategy Research consults a variety of different valuation models and short-term market timing indicators. The forecast horizon is two years into the future for macroeconomic indicators and up to one year into the future for financial markets. This publication was prepared on the date indicated. The bank does not undertake any obligation to update this publication. Discrepancies may emerge in respect of our own financial research from the twelve months preceding publication, relating to the same fi-nancial instruments or issuers. The entire content of this publication is protected by copyright law (all rights reserved). The use, modification or duplication in whole or part of this document is only permitted for private, non-commercial purposes by the interested party. When doing so, copyright notices and branding must neither be altered nor removed. Any usage over and above this requires the prior written approval of the Bank. The same applies to the circulation of this publication. Distribution of Research Publications Unless otherwise stated, this report is distributed by Bank J. Safra Sarasin (Switzerland) AG. This report is for distribution only under such circumstances as may be permitted by applicable law. The Bank expressly prohibits the distribution and transfer of this publication through third parties for any reason. The Bank will not be liable for any claims or lawsuits from any third parties arising from the use or distribution of this material. The Bahamas: This publication is circulated to private clients of Bank J. Safra Sarasin (Bahamas) Ltd, and is not intended for circulation to nationals or citizens of The Bahamas or a person deemed ‘resident’ in The Bahamas for the purposes of exchange control by the Central Bank of The Bahamas. Dubai International Financial Centre (DIFC): This material is intended to be distributed by Bank J. Safra Sarasin Asset Management (Mid-dle East) Ltd [“BJSSAM”] in DIFC to professional clients as defined by the Dubai Financial Services Authority (DFSA). BJSSAM is duly au-thorised and regulated by DFSA. If you do not understand the contents of this document, you should consult an authorised financial advis-er. This material may also include Funds which are not subject to any form of regulation or approval by the Dubai Financial Services Authority (“DFSA”). The DFSA has no responsibility for reviewing or verifying any Issuing Document or other documents in connection with these Funds. Accordingly, the DFSA has not approved the Issuing Document or any other associated documents nor taken any steps to verify the information set out in the Issuing Document, and has no responsibility for it. The Units to which the Issuing Document relates may be illiq-uid and/or subject to restrictions on their resale. Prospective purchasers should conduct their own due diligence on the Units. Hong Kong: This document is disseminated by Bank J. Safra Sarasin Ltd., Hong Kong Branch in Hong Kong. Bank J. Safra Sarasin Ltd, Hong Kong Branch is a licensed bank under the Hong Kong Banking Ordinance (Cap. 155 of the laws of Hong Kong) and a registered insti-tution under the Securities and Futures Ordinance (cap. 571 of the laws of Hong Kong). Luxemburg: This publication is distributed in Luxembourg by Banque J. Safra Sarasin (Luxembourg) SA (the “Luxembourg Bank”), having its registered office at 17-21, Boulevard Joseph II, L-1840 Luxembourg, and being subject to the supervision of the Commission de Surveil-lance du Secteur financier – CSSF. The Luxembourg Bank merely agrees to make this document available to its clients in Luxembourg and is not the author of this document. This document shall not be construed as a personal recommendation as regards the financial instru-ments or products or the investment strategies mentioned therein, nor shall it be construed as and does not constitute an invitation to en-


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