Schroders' Investment Strategy Unit claims that bonds are not a "safe haven" from market turbulence, and that equities will produce superior returns.
According to Schroders revised investment outlook, not only will equities produce superior returns to bonds, returns from cash could outstrip those from bonds within the next few months.
Additionally, Schroders thinks that due to low inflation, competitive currency depreciation could soon become a major policy instrument. If this is so, it would be a “major driver” of increased currency volatility, bringing it back to the forefront of strategy decisions.
Schroders also feels more positive on the US, due to the Federal Reserve cutting US interest rates. Against the backdrop of improved investor confidence, Schroders expects areas such as emerging markets and continental Europe to outperform. In contrast, the UK has a bias towards defensive sectors such as pharmaceuticals, and is likely to lag behind.
By Geoffrey Ho
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