Pension schemes should brace themselves for lower returns and continuing volatility, according to JPMorgan Asset Management chief market strategist for UK and Europe Stephanie Flanders.
Speaking at the National Association of Pension Funds (NAPF) conference in Manchester yesterday, the former BBC journalist warned delegates to "expect less of everything except volatility" after what has been a tumultuous summer for global equity markets.
But Flanders pointed out that volatility was normal and said that, despite nerves over China's slowdown, there were no indications of a "true bear market" or looming crises or recessions.
The knock-on effect of China's problems has exacerbated the growing divergence between emerging markets (EMs) and developed markets (DMs).
Flanders said this could indicate a return to "normal" where debt crises will occur in EMs rather than DMs.
Despite several developed markets, particularly peripheral European countries, having suffered from debt crises and recessions in recent years, the situation in these markets is looking up.
Although Greece is still struggling, countries such as Spain and Ireland are "growing quite fast" whereas Brazil and Russia are in recession.
Flanders pointed out, however, that things were looking quite bad for Germany in light of Volkswagen's carbon emissions scandal.
The turbulent summer has led to uncertainty on when the US and UK will raise rates. It is "doubtful" the Federal Reserve would raise rates by the end of the year because it is not comfortable yet, according to Flanders.
This makes it very unlikely that the Bank of England will raise rates particularly when other central banks in Japan and Europe are still pushing along with quantitative easing.
When a delegate asked why the BoE does not just raise interest rates before the US given the UK's better economic data, Flanders pointed out that the situation is more complex than that.
She said: "Not a single developed country has managed to raise rates since the crisis and make it stick."
Some central banks have even been forced to reverse the policy which has been "very embarrassing".
"It's not that the BoE couldn't do it before the Fed, it's just quite challenging."
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