(Pictured: Robert Buckland)

The outlook for global markets is still positive, but patchy, according to Citi’s latest strategic outlook, presented at its annual clients conference in Sydney last week.

Robert Buckland, global equity strategist, said the rally of the past 12 months had been more about pricing out the bad news than pricing in any good news.

“We’re overweight emerging markets, but it’s a contrarian call,” he said. “It’s to do with their valuations which we believe were pricing in a double-dip (recession) which we don’t think will happen…

“I’m cynical about what’s happening in Japan, however,” he said. “I think they are avoiding making the tough decisions.”

Buckland believes that countries which purposely devalue their currencies are “copping out”. The lower currencies allow company managements to avoid making tough decisions about their international competitiveness.

“Look at the UK through the 1980s compared with Germany. The UK ended up with (British) Leyland and they got BMW.”

He said that all the work he had seen Citi do over the years showed that you can lose more on the currency than you can make up on the stock market.

He also questioned the long-term benefits of the quantitative easing policies of major countries. Instead of incentivizing companies to grow their businesses, the policies prompted them to produce income because of the record low interest rates around the globe.

“Shareholders are not letting companies go out and build their businesses,” he said. “It’s not growth capital, it’s bond-proxy capital, or unrisky equity.”

Citi is currently overweight the UK, emerging markets and Asia ex-Japan. It is underweight the US and Australia. Within emerging markets it favours China, Korea, Mexico, Russia and Taiwan. Its favoured sectors are consumer discretionary stocks, health care, financials and IT.