The recent market turmoil is a ‘pause’ and not the beginning of the end of the bull market, said Luca Paolini, chief strategist at Pictet Asset Management. The positive trend in the U.S. labor market and earnings growth are consistent with a bull market correction in his view as opposed to something bigger. ‘We are in a new phase and more volatility but we are not going to go back to the same volatility we saw in August we think,’ said Paolini, adding that China’s slowdown, not a Federal Reserve rate hike, is the major downside risk for U.S. stocks. ‘The Fed’s decision will not have a huge impact on the markets, everybody expects the Fed to move if not this week then in October or December,’ said Paolini. ‘The impact will be limited but U.S. stocks are more vulnerable because they are more expensive than European, Japanese and also emerging markets stocks.’ Paolini said that European equities are his favorite asset class due to a combination of solid growth, monetary conditions and the earnings cycle.
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