Pictet Asset Management’s chief strategist, Luca Paolini, predicts a distinct shift in the markets in 2014. Particularly, he forecasts central bank liquidity to have less impact on returns and for global economic growth to support the equity market.
In regards to liquidity’s ‘weaker impact,’ Paolini said: "As this transition from a liquidity to growth-influenced markets unfolds, world stocks are likely to deliver more muted returns in 2014 while bonds will in the main struggle to break into positive territory."
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Moreover, when regarding the equity markets, Paolini said: "The key support for equity markets next year will come from accelerating global economic growth. For the first time in several years, 2014 will see an increase in economic growth across all of the world’s major regions. We expect global growth to rise by almost 1 percentage point to 3.3 per cent, US growth to pick to 2.8 per cent and euro zone growth to rise to 1.2 per cent from -0.3 per cent in 2013. Emerging markets will see output increase at a rate of 5.2 from 4.6 per cent."
Overall, Paolini concluded: "When we take our economic projections into account, we think that, for the first time in two years, corporate earnings could rise at a faster rate than consensus forecasts, which currently sit at 10.5 per cent for the US firms and 10.9 per cent for global stocks."
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