Pictet AM Smarts

Welcome back to Pictet AM Smarts, our regular roundup of articles analysing the trends shaping the economy, markets and society. In this month's newsletter, our experts share their upbeat assessment of emerging markets, explore the appeal of Europe when it comes to private assets, and show what a Paris-aligned 1.5°C lifestyle could be like. Happy reading!

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Monthly asset allocation: Risk on

This month we?increase our exposure to riskier asset classes, upgrading equities to?overweight and doing the same with emerging market stocks and debt.

We see positive developments for emerging markets excluding China. The Fed's rate cut and expected further cuts, along with a pick-up in global trade, are making emerging market assets attractive. Emerging economies are growing faster than developed ones (see grey line in chart below), and their cheap valuations (in brown) and positive earnings dynamics add to their appeal. On the fixed income side, emerging market debt, both local currency and corporate, is also expected to benefit.

Barometer October 2024: Emerging markets' turn to shine

Notes from our recent investor trips:

To get the true picture about the economic health of a country or a company, nothing beats on-the-ground research. Our emerging equity investors travel throughout the year.

Here, they report back what they learnt on their visits to Chinese manufacturers, a Peruvian copper mine and various industries in India, showcasing the country's vibrant embrace of technology.

Emerging markets: the view from the ground

Europe is a rich hunting ground for alternative investors, from private credit to distressed

Europe's alternative credit market is often overlooked in favour of the US, but it presents appealing features, according to our expert Gareth Payne:

• Europe's relatively less efficient and less harmonized market allows lenders to secure higher yields on loans, presenting a favourable investment environment.
• Europe consistently outperforms the US in direct lending, despite having lower base rates, indicating the potential for attractive returns.
• Europe's diverse business cycles, socio-economic makeup and currency outlook provide opportunities for portfolio diversification and potential currency contributions.

Alternative credit: don't overlook Europe

And finally, find out what kind of lifestyle changes we are expected to make in order for cities to meet the Paris climate goals.

Over three quarters of resource consumption and related emissions take place in cities, despite occupying just 2% of the globe’s terrestrial surface.

1.5°C lifestyles: consuming and living within planetary limits

Some more reading:

Carbon capture is now seen as vital on the path to net zero

AI is disrupting cancer detection

Watch: We're at the AI tipping point, says Azeem Azhar

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