At a media roundtable in London this week, Luca Paolini, chief strategist at Pictet Asset Management, shared his insights on the macroeconomic outlook and asset allocation across equities, bonds, currencies and alternative assets for the next five years.

At a media roundtable this week, Luca Paolini, chief strategist at Pictet Asset Management, highlighted his preference to diversify away from US equities and to add to European and emerging market ones. He also saw opportunities in fixed income, including UK gilts, and gold.

Speaking at the event, Paolini said US exceptionalism will fade, with US growth not being as spectacular as it was. “China will stabilise at a lower growth trajectory and emerging markets will do better than elsewhere,” Paolini said. “Inflation will also return to central bank rates, but they will remain slightly above target. The US and the UK will struggle, in particular, to keep them down, and there will be higher volatility,” he continued. He believes that artificial intelligence is a game changer but the boost to growth will be incremental and gradual.

Paolini thinks that the return on equities will fall, reaching 7 per cent while on government bonds it will amount to 4 per cent and 5 per cent on commodities. He believes that credit and emerging market bonds will outperform while the dollar will remain in secular decline. Paolini highlighted how gold is now a top reserve and has been in their portfolios for a long time.   

A new report from the European Central Bank also states that gold has replaced US Treasuries as the world's top reserve asset; gold accounted for 27 per cent of global central bank reserves at the end of 2025, compared with about 22 per cent for US government bonds.

The shift reflects both gold's strong price performance and sustained central bank demand, as countries increasingly diversify reserve holdings amid heightened geopolitical uncertainty and a changing global monetary landscape.

“We take the apparent shift in central bank reserve behaviour as a reminder for investors to keep their own portfolio construction top of mind, and exposure diversified across asset classes, geographies, and currencies. We remain constructive on gold over the medium term, despite the risk of more near-term volatility. We forecast prices at $5,500/oz through 1H27,” Mark Haefele, chief investment officer at UBS Global Wealth Management, said this week. “In practice, we think investors should stay diversified across their portfolios, including exposure to gold and other commodities, select euro-denominated assets, and high-quality fixed income.”

Paolini also favours adding to fixed income, notably credit and trimming equity exposure, and believes that credit and emerging market bonds will outperform. He also like UK gilts. Swiss private bank Julius Baer, together with others, also remains positive about the medium-term outlook for gilts.

Paolini believes that investors should diversify away from US equities, although it is good to still have a big exposure there on tech and the AI investment boom. He also favours adding to European and emerging markets equities in Asia.  

A number of wealth managers have been increasing their exposure to emerging markets, which have been outperforming developed countries. For example, Edmund Shing at BNP Paribas Wealth Management  and Orbis Investments argue the case for emerging markets. See here and here.