Investment Conundrums: Hermes IM's Murray on why emerging market assets will fare best in a 'nasty' recession

US markets still not without dangers

A markedly "nasty" global recession over the short-to-medium term is likely, according to Hermes Investment Management's Eoin Murray, who believes the spread of "Japanification" - when an economy suffers a prolonged period of low growth and low inflation, mounting levels of corporate debt and pricing bubbles across asset classes could bruise developed market economies.

What's more, the chief investment officer warned a majority of developed market debt and equity assets have been outperforming global growth since the 1990s, which he said is unsustainable and will inevitably lead to a "period of readjustment".  "If you take US equities, investment grade credit, and even US Treasuries, they have beaten what is already an impressive 4.1% average growth rate anyway, and that cannot last. "Treasuries, for instance, are assets that derive their value from the underlying economy. At some point, a period of re-adjustment will be required. And 4.1% growth is...