Wall Street’s verdict is clear: A second Trump presidency is likely to deliver a blow to an export-dependent European Union that is struggling with sclerotic economic growth and ever-multiplying political crises. Whether it will finally spark some change is the question for patient investors.

Since Wednesday, the day after the election, the S&P 500 has gained 3.7%. Meanwhile, the Euro Stoxx 50 and the FTSE 100 are down. Among those to shed the most market value have been clean-energy firms such as Vestas, carmakers such as BMW , consumer-goods companies such as Nestlé and Unilever and sellers of pharmaceuticals such as Roche. They all sell a lot to the U.S.

The U.S. is the top goods export market for the European Union, and for Germany, with pharmaceuticals, machinery and vehicles topping the export list.

During the campaign, President-elect Donald Trump floated a 60% tariff on Chinese imports and a 10%-to-20% levy across the board. The think tank German Economic Institute estimates that such a measure could make the German economy between 1.2% and 1.4% smaller than it would have been by 2028.

The core of the European Union’s export machine has been plunged into difficulties because of the end of cheap Russian energy, delays in joining the electric-vehicle revolution and an over reliance on selling to China.

Volkswagen last week announced the closing of at least three plants in Germany. According to FactSet, American customers make up 18% of its sales, about the same as the German market.

“I want German car companies to become American car companies,” Trump said last month while holding a rally in Savannah, Ga. “If you don’t make your product here, then you will have to pay a tariff, a very substantial tariff,” he added.

On Wednesday, Oliver Zipse , chairman of German carmaker BMW, underscored that the company has a plant in Greer, S.C.

“The most demanded vehicles in the United States, we produce there,” he told analysts Wednesday in a conference call. “So there is some natural cover against possible tariffs.”

Volkswagen and Mercedes-Benz have factories in Chattanooga, Tenn., and Vance, Ala., respectively. Manufacturers Airbus , Siemens and BASF also service the U.S. market from within, as do Nestlé and Unilever.

Much depends on details. In early 2021, Airbus’s assembly line in Mobile, Ala., was forced to pay tariffs for its shipments of fuselage, wing and tail components from France and Germany, as part of a World Trade Organization dispute. An agreement was quickly reached to suspend them.

Regardless, building up capacity to service all types of American-based demand would be hard. The Mobile plant makes A220 and A320 jets, but A330 and A350 wide-bodies are assembled in France. Volkswagen uses Chattanooga for the Atlas SUV, the Passat sedan and the electric ID.4, but the bestselling Tiguan and Jetta are built in Mexico. Roughly a quarter of U.S. imported cars originate there, and Trump has suggested that a 200% tariff could be slapped on them.

And when it comes to high-performance models, most EU firms still make them domestically and ship them over. Exports to the U.S. amounted to about 800,000 cars in 2023.

To be sure, EU leaders have struck a conciliatory tone with Trump this week, suggesting that a more amicable endgame such as the 2018 trade deal between the U.S., Canada and Mexico is possible.

Another risk is that China would send even more cheap goods to Europe if the U.S. ratchets up its trade war with Beijing. Yes, recent experience shows that China often just reroutes exports through third countries—and, as of recently, faces higher tariffs for electric vehicles in the EU anyway—but even small shifts could have big effects.

For a decade and a half, the 27-nation bloc has limped along, fostering just enough political change to avoid a painful breakup during the debt crisis of the 2010s and the 2020 pandemic, but never enough to truly invigorate its economy. Attempts by France’s Emmanuel Macron and Germany’s Olaf Scholz to change course have ended in paralysis. Scholz’s three-party government collapsed this week, after years that saw the coalition’s pro-austerity member blocking efforts to spur domestic industry with public spending.

Yet the first Trump presidency did galvanise some early support for a cohesive industrial strategy in Europe. The long-term bull case for European equities is that Trump 2.0 will be a catalyst for further transformation. European Central Bank President Mario Draghi published a report in September urging less red tape, state aid to key sectors and, where appropriate, harsher tariffs, all of which has buy-in from officials in Brussels.

On a small scale, the impulse toward a European industrial policy is already playing out. European defence contractors such as BAE Systems, Rheinmetall and Thales have seen their shares jump on the expectation that less American military involvement in Europe will force governments there to rely on their own capabilities. By 2030, the EU wants members to direct 50% or more of their procurement budgets toward European contractors.

Elsewhere, substituting foreign markets for domestic consumers will prove much harder, though providing advantages to buyers of electric vehicles has proved extremely effective in Norway. They now outnumber cars that run on gasoline.

Caught between the U.S. and China, Europe’s economic strategy is soon to face its biggest challenge since the eurozone crisis. Investors are right to be wary.

US: The Federal Reserve approved a quarter-point interest-rate cut Thursday, the latest step to prevent large rate increases of the prior 2½ years from weakening the labour market as inflation eases.

The decision, coming the same week as the election of Donald Trump to a second presidential term, followed an initial cut of a half-point in September and will bring the benchmark federal-funds rate to a range between 4.5% and 4.75%. All 12 Fed voters backed the cut.

Officials have said those moves are warranted because they are more confident that inflation will return to the central bank’s target and because they believe rates are still high enough, even with the latest cuts, to dampen economic activity.

The move was expected. Stocks and Treasury yields were steady after the announcement.

“We are committed to maintaining our economy’s strength,” Fed Chair Jerome Powell said at a news conference. He said officials are confident that with an “appropriate recalibration of our policy stance,” inflation can continue heading lower with a solid economy.

Trump’s election victory this week has the potential to reshape the economic outlook, with presumed GOP majorities on both sides of Capitol Hill enabling a broad shift on taxes, spending, immigration and trade. Economists are divided over whether the mix of policies will boost or weaken growth and drive up prices.

The shift in the outlook, in turn, has fuelled questions on Wall Street over whether the Fed will alter its earlier expectation that rates could be steadily dialled lower over the coming year or two.

Powell said it was too soon to say how the next administration’s policies would reshape the economic outlook.

“We don’t guess, we don’t speculate, we don’t assume” what policies will get put into place, Powell said. “In the near term, the election will have no effects on our policy decisions.”

Powell also said he had no intention of leaving the Fed before his four-year term as chair expires in May 2026. “Not permitted under the law,” Powell said when asked if he believed the president could remove him or other Fed personnel from their positions before their term expires.

Since the Fed cut rates in September, longer-dated bond yields have climbed notably, meaning the cost to borrow for a mortgage or car loan has gone up. Yields have increased in large part because better economic data has led investors to reduce their worries about a recession, which could have triggered larger rate cuts.

But some analysts think the bond-market selloff may also reflect concerns by some investors about higher deficits or inflation in a second Trump administration.

Either way, the market has generated an unusual result: Borrowing costs rose after the Fed cut rates. The average 30-year mortgage rate has jumped since mid-September, to 6.8% this week from 6.1%, according to Freddie Mac.

Over a similar time frame, investors in interest-rate futures markets have steadily reduced their expectations over how much the Fed will cut rates over the next year or so. They now see the Fed cutting rates to around 3.6% by 2026, up from an estimated trough of 2.8% in September, according to Citi.

Officials are trying to bring rates back to a more “normal” or “neutral” setting that neither spurs nor slows growth. But they don’t know what constitutes a normal rate. Policies that boost economic activity or prices could also lead officials to conclude that they should maintain a moderately restrictive rate stance. That means they would hold rates somewhat higher than a normal or neutral level.

Before the 2008-09 financial crisis, many thought a neutral rate might be around 4%, but after the crisis and an extremely sluggish recovery, economists and Fed officials concluded the neutral rate might be closer to 2%.

Interest-rate projections that officials submitted in September show most of them expected that if the economy expanded solidly with inflation continuing to cool , they could cut rates to around 3.5% next year.

Inflation based on the Fed’s preferred index was 2.1% in September, from a year earlier. A separate measure of so-called core inflation that strips out volatile food and energy prices was 2.7%. The Fed targets 2% inflation over time.

Because officials don’t have much conviction over where the neutral rate sits, they are likely to be guided by how the economy performs in the months ahead. If inflation keeps slowing and the demand for workers looks soft, officials could conclude it makes sense to continue cutting rates along the path they envisioned in September.

“We’re going to move carefully as this goes on so we can increase the chances that we get it right,” Powell said. “We’re trying to steer between the risk of moving too quicky…or moving too slowly. We’re trying to be on a middle path.”

If inflation progress stalls or ebullient financial markets raise concerns that inflation might get stuck above their target, officials might face more reservations around continuing to cut rates at a steady, meeting-after-meeting clip.

The most immediate focus is whether the Fed will cut again at its upcoming meeting in December. In September, 19 participants were about evenly divided over whether to cut rates one or two more times this year. Nine of them penciled in no more than one cut in either November or December, while 10 penciled in two cuts.

“There’s a lot to learn between now and the December meeting,” said Diane Swonk, chief U.S. economist at KPMG. “They can’t leave the door wide open, but they can’t close the door either.”

Powell said Thursday it was too soon to rule anything “out or in” at that meeting. Slowing down the pace of rate cuts is “something we’re just beginning to think about,” he said. “We’re on a path to a more neutral stance. That has not changed at all since September. We’re just going to have to see where the data lead us.”

Even before the election result, recent data suggested that cutting again would be a finely balanced decision because inflation looks like it might end the year slightly above officials’ projection, while the unemployment rate has edged lower recently, said Matthew Luzzetti, chief U.S. economist at Deutsche Bank.

The election result— which sent stock markets to new highs while raising the prospect of stronger growth, higher inflation and better labour-market outcomes—boosted the odds that the Fed forgoes a cut next month, he said.

“Those could present a strong case from a risk-management perspective to potentially skip that meeting,” said Luzzetti.

Donald Trump ’s election victory powered the Dow Jones Industrial Average to its biggest gain in two years, with a broad market rally lifting shares of banks, industrial companies and small-cap firms that are expected to benefit from continued economic expansion.

The gains were widely distributed as Wall Street bet that Trump’s promises of deregulation and tax cuts will further ignite an economy that already has posted strong gains in recent years. But sectors that were expected to benefit from Democratic policies, such as electric-vehicle companies and clean-energy related industries, declined sharply.

The promise of four years of Republican rule drove the latest rise in Treasury yields, reflecting expectations of stronger growth and inflation, while gold prices fell as fears that the election results would be contested and spark social unrest weren’t realised.

“The markets are now trading full-on Trump trade,” said Stephen Dainton , a senior executive at Barclays who oversees the lender’s investment bank including its large trading division.

Big winners included banks, which investors bet were poised to benefit from reduced regulation and a fresh acceleration in growth. Shares of JPMorgan Chase , the nation’s largest lender, climbed 11% to a new record. Wells Fargo and Goldman Sachs both rose more than 12%.

The prospect of lighter regulation and protective tariffs helped drive gains in industrials, with equipment maker Caterpillar rising more than 8% to a new all-time high and 3M adding 5%. Domestic steelmakers Nucor and Steel Dynamics gained 16% and 13%, respectively. Railroads, including Norfolk Southern and CSX , surged.

Bitcoin rose as much as 9% and flirted with $75,000, topping a previous record from March. Trump has said that he wants to make the U.S. the “crypto capital of the planet” and has pledged to create a “strategic bitcoin reserve.”

At the same time, traders also sought out companies and assets they expect to suffer during a second Trump administration.

Fears of trade wars drove down shares of ocean freight firms, including Denmark’s A.P. Moller-Maersk and Germany’s Hapag-Lloyd . Copper prices had their worst day in more than two years, dropping 5.1% as metals traders in New York reconsidered demand forecasts that hinge on the Chinese economy and the clean-energy boom.

Investors’ belief that Trump may break with the Biden administration’s push into renewable energy and electric vehicles hit companies as far away as South Korea. LG Energy Solution fell roughly 7%, as did other local EV battery makers, and Hanwha Solutions, which makes solar panels, dropped by more than 8%. In the U.S., First Solar fell 11% while Enphase Energy lost 17%.

Shares of Tesla , the electric-vehicle maker helmed by Trump ally and donor Elon Musk , bucked the trend, climbing 15%.

Investors sold bonds, driving yields higher and widening the gap between yields on ordinary Treasurys and those on inflation-protected Treasurys. That is a sign they think that the policies of a second Trump term could put upward pressure on inflation.

Many investors also believe that Trump’s tax-cut-heavy policies will add to the deficit, with the threat of a larger supply of Treasurys helping push down bond prices. The yield on the 10-year Treasury topped 4.4% for the first time since July.

That hit firms and investments that are sensitive to higher bond yields. The S&P 500’s consumer-staples sector declined 1.7% and the utilities segment lost 0.6% The real-estate sector sank 3.4%. The country’s largest home builder, D.R. Horton , dropped nearly 5% and Zillow Group fell about 7%.

Surging yields intensified a climb in the U.S. dollar, which was also boosted by the prospect of rising tariffs. Economists say tariffs can lift the U.S. currency by hurting the economies of foreign countries and discouraging Americans from spending on imported goods.

The WSJ Dollar Index, which measures the U.S. dollar against a basket of 16 currencies, rose around 1.3%. The Mexican peso lost as much as 3.4% against the dollar to its lowest level since August 2022, according to Dow Jones Market Data, before recovering. Trump recently said he could impose 200% tariffs on vehicles made in the country. The potential for tariffs also drove down the Chinese yuan.

Early wins by Trump in key states assuaged fears that it could take days or weeks for the election to be called. The Cboe Volatility Index—known as the VIX, or the market’s fear gauge—plunged to its lowest level since late September.

The relative calm had investors hoping more gains lie ahead. The S&P 500 had already risen 21% through Election Day, its best performance in a presidential election year since 1936, when Franklin Roosevelt was in office. The Dow Jones Industrial Average was up 12%, its best election-year performance since 1996, when Bill Clinton was in the White House.

“There’s a lot of relief that there’s a clear-cut outcome and that markets can move on to things that are quite frankly more important than who sits in the White House,” said Ross Mayfield, investment strategist at Baird.

Even as the world increasingly moves toward digitised commerce, where transactions are conducted with the tap of a credit card and billions of dollars are moved electronically between banks, there is one group of people for whom hard cash is still king: collectors.

As an alternative asset class, collectible banknotes offer significant potential value to investors, and the market for these paper artefacts is thriving. Aris Maragoudakis , director of world currency auctions at Stack’s Bowers Galleries in Costa Mesa, Calif., estimates the hobby sees annual trade of well over $500 million globally.

In fiscal year 2016, the World Paper Money department at Stack’s recorded about $4 million in sales. By fiscal year 2024, this figure had risen to $14.5 million. The company reported an 18% increase in sales for world paper money (which doesn’t include U.S. paper-money numbers) in fiscal year 2023, followed by 25% growth in fiscal year 2024.

Elsewhere, the Noonans Mayfair London realised £5 million, or about $6.5 million, in world banknote sales in 2023, up from £2.5 million the previous year, a representative said.

The rise of digital technology has helped broaden the base of collectors. Online auctions, forums and databases have made it easier for collectors to connect, trade and research. Greater access to information about collectible money, as well as to collectible banknotes themselves, have transformed the hobby from a game of chance to a strategic pursuit where enthusiasts can actively search for and acquire valuable pieces.

“The advent of social media such as Instagram and WhatsApp have brought in a spate of new collectors, especially youngsters,” says Rezwan Razack , a specialist in vintage banknotes and chairman of the Indian chapter of the International Bank Notes Society, or IBNS.

While social media has made more people aware of older paper currencies and their histories, the declining use of physical banknotes has made them even more alluring and fascinating to collectors.

Where is the value?

Banknotes routinely become obsolete due to political shifts, security upgrades, monetary policies and technological advancements. The question is: Which ones are worthy possessions?

A plethora of factors underpin the desirability of collectible paper money. The major ones are:

• Condition:  The condition of a piece can have a significant impact on its value. “There are bills that sell for $1,000 with a fold or two, but finding one free of any folds, stains, or tears could be worth several times that,” says Maragoudakis.

The condition of a bill is evaluated based on a 30-point scale ranging from poor to uncirculated crisp. Within each condition, a bill is given a number grade; a higher number—on a scale typically from 1 to 70—means the banknote is in better shape.

For example, a 10,000-yuan note issued in 1951 by the People’s Bank of China, graded Very Fine 20, sold for $150,000 at a Stack’s Bowers auction. Three years later at another Stack’s Bowers auction, a similar note in better condition, graded Almost Uncirculated 50,  fetched $358,500.

• Serial number : Banknotes with striking serial numbers are often worth more to collectors than those without. On eBay, a rare polymer £20 bill  with the serial number AA44 444444  received 16 bids and sold for more than £317.

A set of four exceptionally rare  Chinese 1953 10 yuan notes from the People’s Bank of China  recently sold for $432,000 because in addition to their quality, they were consecutive in serial number.

• Scarcity : The appeal and worth of banknotes, as with other collectibles, are often tied to their rarity.

For instance, high-value banknotes were often printed in limited quantities due to their significant purchasing power, says Hakim Hamdani , director at large and a collector at the Netherlands branch of the IBNS. When these high-denomination notes are discontinued, many people cash them in rather than keeping them as collectibles.

Take the 1921 10,000-shilling note from British East Africa (now Kenya and Tanzania), of which few were printed and issued. At that time, it was equivalent to about $2,000, a substantial sum in 1920s colonial Africa. When they were demonetized, most were redeemed, making the few remaining in private hands highly desirable.

Dennis Hengeveld , president of World Banknote Auctions in Sacramento, Calif., says that depending on the condition, some of these notes have fetched between $35,000 and just over $100,000 at auctions.

A rare  $500 Canadian bill  from 1911  brought C$528,750  (about $386,400) at a recent auction, the largest sum ever paid for a Canadian banknote. The specimen features the image of Queen Mary and is one of only four of the bills known to exist.

• Error notes : Governments often withdraw banknotes from circulation to deter counterfeiting, but also due to printing anomalies such as incorrect signatures, numerical discrepancies, misprints and typographical errors. Such deviations can elevate their value among enthusiasts.

In the U.S., double denominations—such as a front displaying a $10 bill and the reverse displaying a $20 bill—are the most prized error notes. The value of some of these pieces could top $85,000, according to Heritage Auctions.

How can I get started?

Despite the potential for a lucrative return, experts say the primary motivation for building a collection should be enjoyment and an appreciation of the history that banknotes provide. It would be best to build a collection with the idea of having fun, says Hengeveld of World Banknote Auctions, which was recently acquired by Stack’s Bowers.

Of course, it’s essential to do your due diligence to avoid fraud. Always buy notes from established dealers and confirm their authenticity with reputable grading services. Independent grading companies such as Paper Money Guaranty and Professional Coin Grading Service provide authentication and grading to ensure notes are genuine and their condition accurately assessed.

Auction houses and local dealers offer currency notes in different price ranges. Online retailers (eBay, Amazon.com, Collectibles & Currency), dealers and galleries (Certified Coin Exchange, George H. LaBarre), and numismatic shows (the MIF Paper Money Fair and World’s Fair of Money) are other useful sources.

As well, there is no shortage of stories where people discovered highly valuable collectible banknotes in attics, books, dressers and photo frames of deceased family members. In Ontario, a rare Canadian $500 bill from 1911  was discovered among the personal belongings of a deceased individual. The nearly discarded banknote, one of only three in existence, brought $322,000 at auction.

Those looking to dip their toes into collectible money may find valuable insights in trade magazines including Bank Note Reporter and the Greensheet, or books such as the U.S. Error Note Encyclopedia and Standard Guide to Small-Size U.S. Paper Money.

Additionally, Paper Money Guaranty, the Smithsonian Learning Lab and other websites can offer a wealth of information on various aspects of grading, collecting and how to properly care for banknotes.

Countries in Asia-Pacific will need to spend big to adapt to climate change. But the cost of inaction could be higher, according to a new report by the Asian Development Bank.

Left unchecked, climate change could punch a 17%-sized hole in the region’s economic growth over the next decades, the Manila-based bank said Thursday.

“The window to stay within the 1.5°C target of the Paris Agreement is rapidly closing,” the ADB said.

The international treaty aims to limit the average rise in global temperatures to that threshold, beyond which experts expect climate change to have increasingly disastrous consequences. In the nine years since the agreement was adopted, inaction has put that goal nearly out of reach, the multilateral bank said.

With greenhouse-gas emissions reaching record highs, nations need to dramatically increase—and immediately start delivering—efforts to get on track for 1.5°C, a United Nations Environment Programme report said last week. Failure to do so will lead to debilitating impacts to economies, the report said.

Asia-Pacific’s position in the climate crisis is a tricky one: it’s both home to some of the most vulnerable economies and a major polluter, contributing over 50% of global GHG emissions.

If emissions breach critical levels, ADB estimates climate change could reduce Asia-Pacific’s gross domestic product by 17% in 2070. Rising sea levels threaten coastal assets and populations, while heat waves would sap labor supply and productivity, and climate-dependent sectors like agriculture, forestry, and fisheries face shocks that will stifle output.

Estimates from the Deloitte Economics Institute calculate that about 75% of Asia-Pacific’s GDP is at high risk of climate disruption. This stands to affect at least half of the world’s labor force, which is in the region and in vulnerable industries. Climate inaction could lead to regional economic losses of about $96 trillion by 2070, the institute said in a report.

Asian countries have made strides toward decarbonising, but just maintaining policies implemented so far will lead to dangerous levels of global warming, the ADB said.

Taking the right type of action won’t come cheap. Estimates for Asia vary widely, in part due to different geographical definitions, but consensus is that funding is well below where it needs to be.

The ADB report estimates Asia-Pacific needs to invest anywhere from $102 billion to $431 billion annually to adapt to climate change. That far exceeds the $34 billion committed over 2021-2022.

Globally, the U.N. calculates the net-zero transition needs $0.9 trillion to $2.1 trillion a year between 2021 and 2050. That “is substantial but manageable in the broader context of the close-to-US$110 trillion global economy and financial markets.”

It remains technically possible to get on a 1.5°C pathway, as solutions like solar and wind power hold promise for fast, sweeping emissions cuts, the U.N. report said.

Getting back on track could be a big boost for Asia-Pacific economies.

The region is well-placed to benefit from the energy transition, the ADB said. It has massive potential for renewable-energy generation and can produce some of the world’s cheapest renewable electricity, it said. Advantages like fast-growing economies, a large workforce and strong manufacturing base equip Asia to develop the technologies needed for global decarbonisation.

That presents a wealth of opportunities for investors.

If governments formulate consistent policies and build climate-oriented financial systems, that can draw the private capital that’s key to plugging the funding gap, ADB said.

Policy uncertainty over could deter investment, particularly in the case of a change of political administrations. Investors hold more sustainable assets when countries adopt climate laws, and misaligned policies reduce incentives for private investors, ADB said.

That is particularly relevant in a year that has seen elections across Asia, including in India, Indonesia and Japan. The upcoming presidential election in the U.S. is in especially sharp focus as the outcome has implications for climate-change efforts.

That’s because of the U.S.’s role as a key player in green innovation and international cooperation on climate commitments and financing, as well as a major trading partner, said ADB principal economist Shu Tian.

Policy uncertainty from a key player can significantly affect the international climate agenda, she said.

“The U.S.’s stance on climate action influences the low-carbon transition through market mechanisms, affecting consumers, suppliers, and investors,” she said. “This, in turn, could impact climate investments across the [APAC] region.”

SYDNEY—Fitch Ratings affirmed Australia’s AAA sovereign credit rating with a stable outlook, even as it highlighted that the country’s high debt relative to countries with similar ratings.

Fitch said the country retains a commitment to the same rules for fiscal sustainability that helped to underpin close to 30 years of economic expansion before the pandemic.

“Australia’s rating is underpinned by the country’s high income per capita and sound medium-term growth outlook, as well as strong institutions and an effective policy framework,” Fitch said in a statement on Monday

It warned that Australia’s fiscal metrics are set to weaken modestly in the next two years. But it anticipated deficits and overall debt would be contained over the medium term, supporting the stable outlook.

The affirmation of the top rating comes despite ongoing concerns about the pace of spending over the past year as the federal government deals with an explosion in costs linked to the national disability insurance scheme while at the same time cutting income taxes.

Government spending measures aimed at cushioning the rising cost of living on households, and falling commodity prices, will put pressure on the budget, Fitch said.

Australia’s general government deficit, which consolidates federal, state and local governments, will reach 2.6% of GDP in the 12 months through June, 2025, from 1.6% in fiscal 2024 and 0.8% in fiscal 2023, Fitch said.

“Aggregate state deficits have been high over the past couple of years, offsetting surpluses at the federal level,” Fitch said. “We also forecast deficit reduction at the state level to be gradual, given a still-large infrastructure development pipeline.”

Rising aged care and the NDIS will continue to pressure the budget, though efforts are under way to contain these costs, it added.

Fitch forecasts economic growth to slow to 1.1% in 2024, from 2.0%, but expects a gradual acceleration in activity from late this year, driving growth to 1.7% in 2025 and 2.1% 2026.

“A recovery should be supported by income tax cuts, probable monetary easing in 2025 and a healthy labor market, which should buoy household balance sheets,” the ratings agency said.

Fitch expects the Reserve Bank of Australia will start to cut interest rate cuts in February, with the policy rate reaching 3.50% by the end of next year, after being on hold at 4.35% since November 2023.

Underlying inflation appears set to trend down to the RBA’s 2%-3% target band by end-2025, from 3.5% in the third quarter, the ratings agency said.

“Still, risks tilt toward delayed cuts given persistent services inflation and a still-tight labor market, with brisk employment growth, low 4.1% unemployment rate and a record participation rate in September 2024,” it added.

FERRET, Switzerland —Nicolas Puech, an heir to the Hermès fortune and long considered one of Europe’s richest men, lives much of the year in one of the dozen houses that make up this tiny village in the Swiss Alps.

In the winter, it’s not accessible by road, so locals use snowshoes to trek into the nearest town for provisions. Few residents know anything about their reclusive neighbour, who has been reported to be worth roughly $13 billion.

“I know he’s very rich,” said Jean-Jacques Éleaume, who is in his 70s and moved to the village because his wife’s ashes were scattered there. “How or why, no idea.”

Mila Fedele, who owns a small mountain inn in the village where hikers stop for the night on their way around nearby Mont Blanc, said Puech usually came in about once a year for a coffee.

“I didn’t even know his name,” she said. “Now, of course, I’ve read like everyone else, I’ve seen the name in the newspapers….”

Puech, who is 81 years old and doesn’t have any children, is in the newspapers due to a stunning claim he made last year: He said he was out of money. As for his stake in Hermès, the luxury giant controlled by his family, he said he didn’t own the shares anymore, and he didn’t know who did.

It’s a mystery tale that could only unfold among the ultra wealthy, in the opulent settings of Italian palazzos and sprawling chalets in the Alps. At stake are 6 million shares in an iconic luxury brand famed for its colourful silk scarves and Birkin and Kelly handbags cherished by socialites. A massive inheritance that was once earmarked for philanthropy now could be lost forever.

Puech’s revelation has spawned questions being whispered about from Paris to Geneva. Did his one-time financial adviser, as Puech has contended, sell the shares and take the proceeds? Is Puech claiming they are lost as part of a plan to leave his wealth to a one-time employee without paying inheritance taxes, as the former adviser has claimed? Could Hermès archrival Bernard Arnault shed light on the situation, as Puech has requested?

Eric Freymond, who worked for decades as Puech’s financial adviser, filed a report with Switzerland’s child and adult protection authority in November 2023, alleging that the employee and his partner, who both live with Puech, had come to control the heir’s life to their own financial benefit. To circumvent his estate plan—laid out in a binding contract that is different from a will—Puech was also trying to legally adopt the man, Freymond alleged.

Puech, for his part, says Freymond himself pilfered the shares as part of a “gigantic fraud,” which could have started as far back as 25 years ago, when he assisted Bernard Arnault, the owner of Hermès rival, LVMH , in his efforts to covertly build a large stake in Hermès.

Even Hermès is in the dark. The company’s chief executive told analysts earlier this year that it can’t say for sure whether Puech still owns his shares.

Complicating the matter is the fact that Puech was issued so-called bearer shares in Hermès, a type of stock that does not need to be registered under a specific person or business and where the ultimate owner is unknown to the company. Dividends for bearer shares are typically paid through the financial intermediaries that hold them on behalf of the owner, which can sometimes lead to challenges in tracing ownership. The rest of the Hermès family hold “registered shares” which are issued in their names.

“Of course at least someone must know where they are,” says Nicolas Borsinger, who runs Puech’s private foundation, to which Puech had planned to leave his fortune until abruptly trying last year to cancel that commitment.

On a late summer day, horned cows grazed through roadside meadows when a Wall Street Journal reporter visited Puech’s big yellow house, by far the largest in the village. A small sign in the window had the word “Privé”—private—scrawled in red marker.

Before the reporter could knock, Puech emerged from the side of the house, appearing in good health and good spirits. He was friendly, and responded affirmatively when asked if he had a nice summer.

Asked if he could talk about the mystery surrounding his fortune, Puech said it wasn’t the right moment and climbed into a small white SUV. A trim middle-aged woman who was driving the car interjected that the reporter should contact their lawyer. The two drove off.

When contacted by the Journal, the lawyer representing Puech, Jörn-Albert Bostelmann, said he wouldn’t comment in depth on what he called a “murky affair” and a criminal matter.

“My client has no intention of going into the details,” he said. “He’s an 81-year-old man who prefers for things to unfold peacefully.”

A lawyer for Freymond said his client denied wrongdoing and disputes Puech’s version of events. “My client is tired of having to defend himself against unreal defamatory allegations that have no substance and are not supported by any proof,” he said.

This account is based on court records as well as interviews with people familiar with the matter.

The financial adviser is fired

Puech, pronounced “pwesh,” was born on Jan. 29, 1943, in Neuilly-sur-Seine, France. He is a great-grandson of Thierry Hermès, who founded the company in 1837 when he opened a workshop in Paris.

Over the years, the Hermès family split into three branches, one of which was the Puechs. Most of the Puech cousins weren’t involved in the business, enjoying quiet lives funded by increasingly sizeable dividends.

From the late 1980s, Nicolas Puech spent much of his time at his farm located about an hour from Seville, in the south of Spain. The property, whose name means Four Winds in English, is secluded, and Puech enjoyed spending time among the eucalyptus and cork oaks, surrounded by his horses, pigs, goats, and his Labrador, called Nectar. He didn’t work.

“Horses are his passion,” said a person who has known him for decades. “Architecture, interior design, history, travel. I would say he leans more toward the artistic…. He has always been a bit frustrated, I think, growing up in a family where numbers were valued more than art.”

In 1993, Hermès went public, but the family kept a 74% ownership stake. Three years later, Puech inherited around 5% of Hermès when his mother died, making him one of the company’s largest individual shareholders. He inherited another 1% stake in the company when his sister died several years later.

In the absence of a partner or children, Puech set up a foundation and in 2017 named Nicolas Borsinger as chief executive to run it. Puech himself came up with the name, the Isocrates Foundation, in honour of the ancient Athenian orator who promoted the use of rhetoric as a solution to societal problems.

Borsinger, a quiet Swiss national who had a distinguished career working for the International Committee of the Red Cross, was told he would eventually have billions of dollars to distribute to causes including investigative journalism and other ways to combat misinformation and conspiracy theories.

Puech attended board meetings, as well as annual staff retreats. In September 2022, they convened at the Tuscan mansion of Puech’s wealth manager, Freymond, who was also a foundation board member.

Two people who were there said Puech seemed pleasant, engaged and happy.

Upon returning to his house in Geneva, Freymond found a letter in his mailbox. Puech was firing him, effective immediately.

Freymond had known Puech since the 1980s and considered him a friend as well as a client. Now Puech was dismissing him without even confronting him in person.

Then last fall, Borsinger, the head of the foundation, received his own letter.

In slanted handwriting across the top of the letter, Puech wrote: “Annulation pacte successoral.”

Translation: “Cancellation inheritance agreement.”

“I irrevocably declare the cancellation of this agreement in its entirety,” Puech wrote. “Not only because I was mistaken in believing that this agreement, in favor of my…foundation, could protect me and my assets, but also because I intend to make other testamentary arrangements.”

“We were shocked,” Borsinger recalls. “To start with, we didn’t even believe it was possible, and quite often I still can’t believe it.”

Beneath Puech’s signature, he stated that it had been written in the office of his new lawyer, Bostelmann, and in the presence of Jadil Butrak, a Moroccan national, and Butrak’s partner, Maria Paz.

Weeks later, Freymond filed a report to the Swiss welfare agency in which he claimed that Puech, or those around him, were taking steps to try to transfer Puech’s fortune to Butrak and Paz. Butrak had been hired by Puech many years earlier as a “laborer / gardener,” the report said, and Paz had also worked for him. It alleged that Butrak and Paz exerted more and more influence over Puech during the Covid-19 pandemic, when the heir lived in fear of catching the disease.

“They have—to everyone’s surprise—managed to make themselves ‘emotionally’ indispensable to him,” the report stated.

A section of the report titled “gradual isolation and extravagant spending,” detailed how Butrak and Paz received more than 54 properties from Puech over the years, including homes in Spain, Portugal and Montreux, Switzerland.

Finally, Freymond claimed that Puech, Butrak, and Paz had submitted an adoption request, so that Puech could legally become Butrak’s father.

Adopting Butrak would allow Puech to forgo most of the inheritance taxes on his wealth. It also would allow him to cancel giving his Hermès shares to his foundation as he had agreed. A bequest to children, even recently adopted ones, was one of the few ways Puech could unilaterally cancel the contract that laid out the original plan to give his holdings to the foundation.

“The obvious goal of this approach is to capture the ownership of the Hermès shares,” the report stated.

The lawyer for Puech, Bostelmann, said that Freymond’s allegations were “absurd” and that gifting dozens of properties would represent only 1% of Puech’s wealth. He said Puech, Butrak, Paz and her two children “have been living in a shared community, domestically, and happily together for around two decades.”

Does Arnault hold the clue?

Many in the Hermès family—including Nicolas Puech himself—suspected that clues to his fortune’s whereabouts could lie decades in the past.

And they suspect one person might have helpful information: Bernard Arnault, the chairman of Hermès’s archrival, LVMH.

In 2001, Arnault was on the hunt for acquisitions, having recently lost out in a battle for Gucci. And in June of that year, an LVMH employee in Geneva reached out to Freymond to ask whether the he would be “willing to assist and partner with LVMH in the goal of acquiring Hermès,” according to a lawsuit later filed by Freymond against LVMH and Arnault seeking to get a commission for his efforts. The lawsuit was later withdrawn.

Freymond respected Arnault, seeing him as a genius who was Europe’s answer to entrepreneurs like Bill Gates . He agreed to help by leveraging his relationships with the various Hermès heirs to acquire shares in secret, which he was able to do in part because he had so-called “discretionary management mandates” on Puech’s accounts and later a number of LVMH-affiliated accounts as well, according to the lawsuit.

The lawsuit alleged that Puech agreed to the plan, but “was unaware of the finer details of the trades and did not wish to know them, as long as his portfolio was managed in his best interest.”

Starting in June 2001, Freymond steadily built the Arnault stake up to just under the disclosure threshold of 5%.

In September 2006, Freymond met with Arnault at Château d’Yquem, LVMH’s wine property in Bordeaux, to talk about how to build the stake even bigger without being detected. Puech joined them for the first time, according to Freymond’s lawsuit.

Over a series of meetings, they came up with a complex plan to use equity swaps and collateral-backed trades to effectively disguise the transfer of Hermès shares into LVMH hands. According to Freymond’s lawsuit, some 13 million Hermès shares were transferred to banks and then on to LVMH in this way. Almost all of these transited through Puech’s bank accounts, the lawsuit states.

The multiyear operation didn’t become public until Oct. 23, 2010, when LVMH declared that it held 14.2% of Hermès and would increase this percentage to 17% in the following days. It later increased its stake to 23%.

Arnault and LVMH insisted that they had no intention of taking control of Hermès or seeking board representatives. But the Hermès family considered it an assault on family unity.

Hermès Chairman Bertrand Puech , Nicolas Puech’s late brother, told the French daily Le Figaro, “With friends like these, who needs enemies?”

Swiftly, the Hermès family set up a holding company to pool its shares. Those who participated relinquished their rights to sell the shares for several decades, making it impossible for anyone to take over the fashion house.

Nicolas Puech was one of the few family members who refused to participate.

He registered to vote for the May 2011 Hermès annual meeting as the personal holder of more than 5 million shares. His foundation was listed in the shareholder documents as owning an additional 900,000 shares.

The takeover thwarted, Arnault’s LVMH was fined 8 million euros for not properly disclosing its purchases of Hermès shares. The luxury giant agreed to distribute its Hermès shares to LVMH shareholders and promised in writing not to purchase further shares of the company for the next five years.

Still, some family members and Hermès executives suspected that Puech had betrayed them and sold his stake to Arnault. How else could they explain that Arnault had amassed such a large amount of shares, given that only about a quarter of the company’s shares were publicly available?

Despite taking credit for the subterfuge, Freymond has consistently claimed—and reiterated to the Journal—that the LVMH stake did not include Puech’s inherited family holdings, and that he never managed those shares.

In 2012, Hermès chairman Henri-Louis Bauer flew to Biarritz to confront Puech directly. He denied selling shares to LVMH, saying they were in a bank account in Geneva. Bauer said he followed up a few months later, and Puech promised to double check.

In 2014, Hermès asked Puech for a bank statement confirming how many shares he owned. He refused. Hermès stopped stating how many shares Puech owned in its annual report.

In October 2015, Hermès lodged a criminal complaint in Paris against an unnamed individual for “forgery and use of forged documents” stating the number of shares he held. The unnamed individual, according to people familiar with the matter, was Puech.

Investigators later broadened the case to include Freymond.

Puech at the time denied the allegations, writing to a judge in 2018 that he had “personally, on several occasions” verified his Hermès holdings.

Tip of the iceberg

Some people close to Puech say that he believes he was being truthful in all of his previous attestations to owning the shares, and only came to believe otherwise after his split with Freymond.

In 2023, a year after revoking Freymond’s mandates as financial adviser, Puech filed three lawsuits against him in Geneva, accusing his former adviser of “massive fraud.” The lawsuits also target another board member of the foundation, along with “all other individuals involved in the offenses described.”

One of the lawsuits says that in 2021, but mostly in 2022, Puech began to ask Freymond more questions about his wealth as he was trying to organize his estate.

“I blindly signed all the documents that Eric Freymond asked me to sign, without any further explanation, given the complexity of managing such a large fortune,” Puech wrote in the lawsuit. “Eric Freymond’s strategy was aimed at stripping me of my fortune. Me, his supposed friend.”

In his lawsuit, Puech called on the court to solicit testimony from Arnault and raid his house in Paris’s seventh arrondissement, as well as LVMH headquarters, to determine what he knows about the fate of the shares.

He asked the same for Freymond and his wealth-management firm in Geneva.

Arnault and LVMH didn’t respond to requests for comment.

For now, both sides continue to fight on the legal front. In throwing out Puech’s lawsuits, the court cited Puech’s inattention to his own financial affairs.

Switzerland’s child and adult protection authority has dismissed Freymond’s report without taking any action.

The foundation is in a holding pattern and hasn’t received any money.

Puech wrote in one of the lawsuits that he believed Freymond had created a trust or some other entity abroad that was now holding either the Hermès shares or the proceeds from their sale. He attached bank statements, including one from Panama, for accounts that he said he only learned about recently.

The documents he provided, he said, “likely represent only the visible tip of the iceberg.”