The world economy will recover over the rest of this year and probably quite strongly, according to Mr David Dick, head of European equity strategy at Goldman Sachs Asset Management UK. Addressing delegates at a pensions conference in Dublin, Mr Dick said he was confident about growth. The predicted "double dip" in equities is not going to happen, he said.
He believes equities will outperform bonds this year. The only fly in the ointment, in the view of the London-based portfolio manager, is inflation. "Euro-zone core inflation is above the 2 per cent target level and, when producer and commodity prices go up, central bankers respond by raising interest rates." Mr Dick expects sustained interest rate rises over the next 12 months firstly in the US and then in Europe.
Speaking at the second annual UK & Irish Pensions and Investments Summit, the strategist suggested that interest rate-sensitive sectors such as banking, utilities and insurance be avoided in the current environment.
He said the lesson in equity markets over the past three years was the virtue of being contrary. "The best time to invest in equities is when things look at their most utterly miserable."
On the issue of the domestic equity bias in pension fund asset allocation, Mr Dick said it exposed funds to stock-specific risk. "By investing in global equities, you can significantly remove that risk."
