“These are the big macro forces that I believe are going to shape developed economies over the next few years and will probably play into the hands of investors eyeing infrastructure assets,” Mr Minack said.
This combination of factors, coupled with already overleveraged central banks “trying to get us to lever up even more” has destroyed the prospect of decent returns in safe debt, he said.
“The return for US equities over the next decade in real terms is likely to be two per cent, assuming the current high margins are sustained. If we see margins revert then I think the real return for US equities over the next couple of years will be negative,” Mr Minack said.
Speaking at a media briefing for the newly-formed Global Macroeconomic Advisory Committee of Maple-Brown Abbott Global Listed Infrastructure (MBA GLI), Mr Minack compared the European and US markets to Japan.
“If you compare the US and Europe now to Japan at the same stage in its cycle, the parallels are obvious,” he said.
“Five years after Japan’s bubble burst in 1996, it had public debt to GDP ratio at 30 per cent. Five years after the bubble burst you’ve now got debt to GDP at 70 to 90 per cent elsewhere. The starting place is far worse for governments outside Japan than it was for Japan two decades ago,” Mr Minack said.
