Investors should prepare for more volatility, shorter business cycles, more asset purchases by central banks and below-average returns as populations age, according to Deutsche Bank AG.
“There are no stand-out opportunities in developed markets,” London-based strategists Jim Reid and Nick Burns wrote in a research report. “Credit has normalized to average valuations, equities have arguably returned to above average valuations with bond yields now looking rich relative to history. Property still looks highly valued with commodities the asset class with most to lose if all assets mean revert.”
The “golden era” for investment in the 25 years through 2007 resulted in a 50/50 portfolio of U.S. Treasuries and equities returning an average of 7.3 percent, Deutsche Bank said. That was partly because of one of the world’s biggest periods of population growth in its history, between 1950 and 2000, it said.
“The ultra-supportive demographics of the past cannot be repeated,” the note, dated Sept. 10, said. “De-population is a genuine problem for parts of the developed world going forward. Indeed on that front Europe is more at risk of repeating Japan’s problems than the U.S.”