The Geneva-headquartered private bank set out its asset allocation views as French elections loom over the horizon, and said it is positive on European stocks and cautious about the US.

Swiss private bank Lombard Odier says it is continuing to take a bullish stance on emerging market equities, is recommending investors hold European stocks, including Swiss securities, but is growing wary of equities in the US. And the firm has flagged up the risk to the euro from a win - which it does not expect as its base case, of the far right in the French presidential elections in May.

“We believe the current US market valuation calls for some caution. Trading at over 18 times 2017 expected earnings, we believe much of the support from corporate tax cuts has already been discounted, making any delays or lesser-than-expected reforms a risk," Samy Chaar, chief economist at the Geneva-headquartered bank, said. (He referred to expectations of large corporate tax cuts by the Trump administration.)

"By contrast, European markets are trading at 15x 2017 earnings, reflecting the political risk and associated caution on the part of international investors. A win for Emmanuel Macron [centre-left presidential candidate] in France (which we believe is by far the most probable scenario) should push investors to reassess their underweight in European equities," he continued.

On the fixed income side, Lombard Odier is bearish on developed market sovereign bonds and continues to favour emerging market local currency debt.

"In the credit space, despite elevated leverage, we believe the coverage of interest expenses should remain sufficient to avoid a surge in corporate defaults, and recessionary risks are being postponed to 2018 or beyond," he said.

Turning to currency views, and the French election impact on the euro in particular, Chaar said: "However we would re-emphasis the asymmetrical risk of a victory by Marine Le Pen in France. Indeed, as opposed to the 2011 Greek crisis, where in time the euro has partially benefited, this time around the entire bloc and the future of the single currency could be at stake."

"While we estimate such an outcome at a conservative 5 to 10 per cent probability, should populism get hold of France, the euro would undoubtedly crash, albeit at a different magnitude against different currencies. We believe that in such a scenario the main beneficiary of a liquid currency pair would be the Japanese yen (against the euro), the typical safe-haven escape. The latest example of this was on 24 June, when Brexit became a reality. Here sterling lost 15 per cent against the yen in the vote’s immediate aftermath. We believe the same might well apply in EUR/JPY if a Le Pen victory materialises in France. For this reason, we recommend spending some premium on a hedge, and investing in a put on EUR/JPY with a 1 month maturity," he added.