Pictet Asset Management has identified private markets, commodities and emerging markets as the key drivers for investor returns over the next five years.
The firm has made the forecast after carrying out research, as part of its secular outlook for 2022, into how investors could react to a fall in the global economy. This could lead to lead to tighter financial conditions, a peak in US job growth, and larger output gaps, which would all point to a recession within the next two years.
Luca Paolini, chief strategist at Pictet Asset Management, said: “The next five years will present a shake-up to existing approaches to asset allocation as developed market growth stalls.”
In its research, Pictet analysts claim “double-digit opportunities” are achievable across emerging markets, particularly China, and other high-risk assets in the alternatives sector.
Beyond commodities, Pictet identified value in gold, infrastructure, real estate and private equity, which if proved correct could lead to a shift in asset allocation for investors.
Paolini added: “We forecast that commodities outside of the energy complex could return well in excess of inflation over the next five years.
“Our analysis shows real estate and private equity should each outperform developed market equities over our five-year forecast horizon boosting a portfolio’s return while gold and infrastructure help diversify its sources of risk.”
Paolini also bucked economic predictions that current rates of inflation will be long term and potentially leading to ‘stagflation’.
He instead supported the belief that the 2022 inflationary surge will prove to be short-lived, with supply chains freeing up after Covid restrictions and the war in Ukraine having less of a direct impact on commodity prices in coming months.
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