Reduce your exposure to US assets before they lose value, Pictet warns investors
Investors should further reduce their exposure to US Treasuries and the US dollar over the next decade, as tech-driven inflation and high government deficits are likely to erode their value, a leading private bank has warned. Shifting to commodities and equities in emerging markets offers a greater chance of long-term returns, with global inflation expected to remain volatile and sticky for years…
Leading private bank Pictet Wealth Management has cautioned investors to decrease their holdings in US Treasuries and the US dollar over the next decade. The bank predicts that tech-driven inflation and substantial government deficits will likely diminish the value of these assets. To potentially achieve greater long-term returns, Pictet advises investors to shift towards commodities and equities in emerging markets.
A volatile and persistent global inflation, driven by factors like the AI boom and decarbonisation efforts, is expected, according to the Swiss bank.
Kelvin Tay, Pictet's chief investment officer in Asia, emphasized that higher inflation and government deficits underscore the importance of investing in assets that governments cannot print. Frederik Ducrozet, Pictet's head of strategy and macroeconomic research, noted that clients have recently shown interest in discussing currency hedging, a topic seldom addressed in the past. Ducrozet stressed that investors should protect themselves against the government's ability to print and devalue money.
Pictet projects that the US dollar will continue to lose value over the next decade, potentially reaching 5.97 yuan per US$1 and 1.30 euros per US$1. Currently, the exchange rates stand at 6.74 yuan per US$1 and 1.16 euros per US$1, respectively. Instead of investing in the US dollar and Treasury bills, Pictet recommends increasing exposure to "real assets" such as gold, commodities, and sectors connected to the AI boom.
Governments worldwide are pushing for resource sovereignty, leading Pictet to forecast 13.3% and 10.2% compounded yearly returns for gold and commodities, respectively, over the next five years. Asian equities, excluding Japan, are expected to yield 8.3% annual returns in the coming decade, outperforming advanced markets like Japan and the United States due to the region's significant role in AI infrastructure development.
Although Chinese equities have underperformed their Asian peers recently, Tay believes the valuations remain attractive, although a turnaround in momentum may depend on policies from Beijing.
Written by urgent.news from SCMP Business's reporting — not their text. Machine-written — it may contain errors, so check the original before relying on it.
