For euro-zone investors, optimal portfolio composition is now completely different from the past

In the euro zone in the past , long-term interest rates were higher than the nominal growth rate and, moreover, were declining. This explains why holding bonds was preferable to holding assets offering growth-linked returns (equities, real estate) and explains bond investors’ success. But today, long-term interest rates in the euro zone are significantly lower than nominal growth and are stable ; t hey could rise in the future. This obviously means that holding bonds is now significantly less attractive than holding assets whose returns are linked to growth. This is going to pose a persistent problem for all investors whose portfolios are predominantly invested in bonds.