Leading economic strategist Peter Perkins pulled no punches in his keynote address at the Citywire Berlin 2012 presenting a hellish case for bond investors.
Perkins, who is a consultant and strategist with MRB Partners, told delegates at the event that the current climate was more favourable for equities, unless you have a deflationary outlook.
‘We have very low yields, low inflation, highly accommodative monetary policies and high government debt. Unless you have a deflationary outlook and you think nominal GDP will go down, there is nothing left for bonds.’
‘If you do not have a deflationary theory, you should not be buying bonds for yourself or for your clients’ portfolios.’
Perkins offered a similarly hardline view at the Citywire New York event earlier this year when he told bond investors to prepare for the end of the greatest 30 years that they would ever enjoy.
He added: ‘Bonds are now overvalued by our reckoning and this is a danger to any part of a portfolio which has any element of bond assets.’
On equities, Perkins was however more optimistic, saying: ‘The equity outlook is a bit better and even US equities look even more so as they are highly linked to the global growth story. The US market has a very large share of its companies which are generating a great deal of their earnings and revenue abroad.’
Perkins did accept that, according to MRB Partners’ analysis, equity valuations are ‘not outstanding’ and the entire market situation is not optimal but in a period of low inflation and low price-to-earnings ratios, that it is time to buy.
However, in response to questions from the floor, Perkins did offer a more positive appraisal of emerging market debt. ‘Emerging market debt is not a bubble, it is going to continue to grow and I think it is going to be a much more prominent asset class over the next decade.’