The views came from Dr Wolfgang Seidel, Professor of Finance at ESCP Business School, giving a presentation at the Elite Wealth Management conference.

The academic was downbeat on the US economy, arguing that recent growth seen in the US was the result of the economic stimulus and companies rebuilding inventory, but there are still some 11 million unoccupied houses. Their purchase is restrained by limited credit availability, which also curbs small business investment and consumer demand. On the other hand, a double dip is unlikely as cyclical activities are already at very low levels and the famed QE2 should provide some stimulus to growth, Dr Sidel said.

Dr Seidel said he was more worried about the current political situation in the US (in which the Republicans won control of the House of Representatives and gained seats in the Senate). “When the leader of the House of Congress is quoted as saying that his main priority of the next two years is to ensure that President Obama serves only one term, as opposed to jobs or reviving the economy, this is worrying for the US economy,” he said.

He is also concerned that the US economy is currently in a deflationary situation as indicated by Google’s index of prices on the internet which is probably more up to date than government figures.

Yet, by many metrics, US and European equities are cheap, and the premiums over real government bond yields being paid by equity dividends are at historically high levels. Given the sluggishness of developed markets, however, it is best to focus on companies in developed economies that have significant exposure to emerging market growth stories and companies with solid dividend yields, Dr Seidel said. He is also positive about hedge funds, saying: "Hedge funds live off market mispricing and inefficiencies."

“The banks have ceased to trade for their own account in many areas which means that there is more opportunity for hedge funds to make money,” he said.

He added that there are other areas of interest for adventurous investors, such as private equity in areas such as agricultural land, water sources and oil and gas real assets. In general, however, sentiment is not on the side of the investor right now.