Get out of bonds and into shares: Pain

[VIDEO] Well-known investment commentator Jonathan Pain is far more upbeat about financial markets than he was a year ago. Here he explains why and what it means for asset allocation and portfolio construction.

Thursday, July 18th 2013, 12:30PM 1 Comment

Pain, speaking at the recent Perfecting Investment Portfolios conference, believes economic conditions have changed much in the past year that investors need to adjust their portolios to benefit from what is happening.

His key premise is that the global economy is in a strong recovery mode and equities are the place to be. "Equities are a call option on growth," he says.

"In the next five years we are going to see a rate of growth, the greatest any of us have ever seen."

In the United States is finally truning the corner there has been a series of good economic numbers showing that the world's largest economy is through the GFC and growing again. He sites house and car sales along with improving business and consumer confidence as data that supports his position.

Overall he is predicting 3% growth for the US economy which is far higher than the consensus view.

When it comes to the second largest economy, China, Pain isn't too worried about the current economic slowdown. His view is that with such a big economy growth rates of 9 and 10% are unsustainable. He says there is a shift to domestic consumption which is helping the economy and one of the biggest issues is pollution and the quality of growth.

Pain says China now has a reformist leader and the government will manage the economy successfully. "I do not subscribe to the hard landing scenario."

Japan also has a new Prime Minister, Shinzō Abe, who will be a "game changer." After years of economic under-performance Pain suggests the country will see "much more robust growth over 12-24 months" and he is now, for once, reasonably optimist about that country's prospects.

Europe, is less attractive as it has too much debt, Pain says. He does not subscribe to the theory about the potential dissolution of European Union. "There is too much political capital invested in Euro project," he says.

For more on Pain's views watch this video

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Comments from our readers

On 18 July 2013 at 9:54 pm Collin said:

Extreme asset allocation views, such as moving completely out of an asset class, are potentially hazardous for long-term investors. Recent sharemarket returns have been very strong i.e. markets have anticipated most of the improving economic fundamentals Mr Pain refers to. Long-term investors are better served by accepting that short-term returns are 'uncertain' and that markets are inherently volatile.

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