While equity markets haven’t got off to a strong start this year after the rally of 2013, investors should use any significant weakness as a tactical chance to buy, according to Pictet Asset Management.
While equity markets haven’t got off to a strong start this year after the rally of 2013, investors should use any significant weakness as a tactical chance to buy, according to Pictet Asset Management, part of Swiss private bank Pictet.
The firm remains overweight emerging markets – a stance that puts it on a different tack from some of its rivals who have been nervous about this asset class – and cautious about the US equity market.
“Growth momentum remains solid and inflation is largely under control. What is more, stocks’ current valuations and the Fed’s decision to reduce monetary stimulus do not loom as a hindrance to equity investors,” said Luca Paolini, chief strategist at Pictet Asset Management.
“Investors can therefore maintain a modest overweight in equities and some other riskier asset classes. While we expect developed market stocks to deliver moderate returns of some 5 to 10 per cent in 2014, we would consider any further weakness as a tactical opportunity to increase exposure,” he said in a note to journalists.
“We think the pattern of emerging market equity underperformance vs developed markets, which has widened the discount on emerging-to-developed market stocks to more than 30 per cent on a price-earnings basis – is now at odds with fundamentals,” he commented.