Mr. Paolini is Chief Strategist at Pictet Asset Management (Pictet AM), a position he has held since 2012.
From The Trade, August 2:
Fireside Friday with… Pictet Asset Management’s Luca Paolini
The TRADE sits down with Luca Paolini, chief strategist at Pictet Asset Management, to discuss the key themes that impact strategies recommended to investors, how these strategies are executed by traders, and the impact of the current macro landscape.
How are you seeing traders execute the strategies that you are recommending?
The next five years will deliver an economic environment that will alter the dynamics of equity, bond and foreign exchange in several ways. Equities will struggle to repeat their stellar performance of the past few years. In absolute terms, stocks in the MSCI World Index will generate a reasonable return of some 7% per year in local currency terms over the next five years.
But relative to corporate bonds, our calculations show they will deliver an excess of return of just 1% per year versus around 10% over the past five years – and this for roughly two times the risk. This means fixed income will offer a more favourable risk-adjusted return than stocks. Investors should, then, allocate more to fixed income and especially corporate bonds. We think the dispersion of returns across regional and national equity market will fall. Equity investors, therefore, may find it more rewarding to invest along sectoral or thematic lines. The foreign exchange market will be defined by a steady but persistent depreciation of the US dollar. On a trade-weighted basis, we expect a decline of some 2% per year through to 2029. Assets that are negatively correlated to the dollar should account for a larger share of portfolios.
What are the key macro themes that impact the strategies you are recommending to investors?....
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