Luca Paolini, chief strategist at Pictet Asset Management, has forecast that equities are set to outperform, as highlighted by Private Banker International last month, writes Holly Parmenter.
Paolini also said the outlook for bonds is ‘less encouraging’ as the scope for gains in government bonds is limited and the US Federal Reserve shift to a less expansionary monetary policy means inflation pressures are ‘unlikely to ease’.
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Valuations in emerging markets are especially compelling as stocks are trading at a 24% discount to their counterparts on a price-earnings basis.
Countries with significant economic and financial imbalances such as Turkey and South Africa remain cautious, whilst China and Russia are preferred markets as valuations are especially attractive.
Overall, the dispersion of returns among individual EM countries is set to increase further in the months ahead. Japan’s equities are also set to benefit from a further depreciation of the JPY. It is believed that Japanese authorities are targeting a rate of Y110-15 to USD, emerging market equities and Japanese stocks.
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