“It could be one of the most challenging environments for investors in decades,” said Pictet’s chief strategist Luca Paolini.
“I think what we’re going to get is more volatility and less returns,” he told a press briefing in London.
Pictet’s view in based on a fairly weak outlook for economic growth over the next few years, particularly in developed markets; monetary policies from world central banks moving deeper into unconventional territory; and a US dollar that is headed for a major reversal of fortune.
As a result, Paolini said, emerging market assets were set to be the best performers over the next five years at the expense of such mainstays as US stocks and government bonds. Although he also saw value in eurozone and Japanese equities relative to the US thanks to ongoing monetary policy easing.
Even if investor do allocate more to emerging market markets stocks and bonds and less to US equities and government bonds this would still not secure an attractive risk-adjusted long term return, he added.
To achieve that investors would need to embrace alternative investments like gold and absolute return strategies, he said.
“Opportunities for generating capital growth can still be found but they will be concentrated in areas that lie a little beyond the mainstream.
“Therefore investors will need to be braver and more tactical,” he said.