UK/EUROPE - Schemes should avoid European stocks while economic growth remains uncertain, Barclays Global Investors claims.
It says business confidence is low which reduces corporate spending and the number of new workers being hired. This, says BGI chief economist Hadyn Davies, hits consumer spending which is flat across Europe.
And it ruled out export performance boosting the market in the short-term.
Davies said Europe’s “modest” public sector spending would fail to boost growth, especially when compared to what he called the “extravagance planned by the US and UK governments”.
Davies said: “European markets have fallen especially hard, despite having been spared the accounting scandals that have beset the US.
But weak demand at home and a slowdown in overseas sales do not bode well for firms’ profits, and investment analysts are very pessimistic.”
BGI added the only hope for European markets is an interest rate cut from the European Central Bank. But Davies said this was unlikely as the ECB was not as “impulsive” as other policy makers.
Meanwhile, PIMCO is urging schemes to avoid US stocks because they are still “massively overvalued”.
It attributes the overvaluation to what it calls “phoneyed up” company earnings, such as operating or pro-forma numbers. Pimco believes that at least half of all the earnings growth in the past 40 years had been “mystical”.
Managing director William Gross said: “Stocks stink and will continue to do so until they are priced appropriately, probably when the Dow Jones index is around 5000. Earnings have been phoneyed up for years, and the market still sells at high multiples of phoney earnings.”
And he asked whether stockholders are “naive, stupid, masochistic or better yet, in this for the long run?”.
Even when markets begin to rise again, Gross added that they are only likely to produce inflation-adjusted returns of around 5% if they mimic trends over the last 100 years.
Most respondents in this week's Pensions Buzz do not think businesses should be able suspend AE contributions if in financial distress.
Former BHS owner Dominic Chappell has lost the appeal against his section 72 conviction and sentence for failing to hand over information to The Pensions Regulator (TPR).
This week's top stories include Marsh and McLennan Companies agreeing to buy JLT, and the home secretary calling for AE to be scrapped in a no-deal Brexit scenario.
Lesley Titcomb says the watchdog wants closer interactions with pension funds to spot problems sooner and act before having to use its more stringent powers