The savings and investment plan that one follows over the course of one’s working and retirement life is among the most critical decisions an individual can make. The balance between consumption and savings determines one’s overall quality of life, not
With interest rates higher amid a challenging macro environment, we see a compelling case for bond allocations and are cautious about higher-risk investments
“Returns are unforecastable,” according to the conventional wisdom. In his book A Random Walk Down Wall Street, Burton G. Malkiel famously proclaimed that a monkey throwing darts at the Wall Street Journal could select a portfolio no better or worse
Our baseline cyclical forecast includes shallow recessions and rising unemployment across large developed markets, with growth unlikely to bounce back quickly. Central bankers appear squarely focused on …
Volatile markets underscore the need for a sound investment process. Heightened uncertainty breeds bias, which can lead to irrational behavior and human error. As a steward of our clients’ capital, PIMCO is constantly looking for ways to test, challenge, and
Growing uncertainty in markets has rekindled the age-old “active vs. passive” debate. In 2017, PIMCO published results of an exhaustive study that showed active U.S. bond mutual funds had largely outperformed their median passive peers over many years, whereas active
Despite the many unknowns, we developed five main conclusions regarding the cyclical six- to 12-month outlook that we think are most relevant for investors at this stage. We will discuss the longer-run, secular ramifications of the current situation at our
Amid heightened volatility, many investors are concerned about the resiliency of their portfolios. Yet in today’s markets, it can be challenging to add diversification without compromising returns. Traditional diversifiers, such as high quality government bonds, offer limited return and diversification
EXECUTIVE SUMMARY • Peak fiscal policy support, and therefore peak real GDP growth, was likely realized in 2021, and the global economy now appears to be rapidly progressing toward late-cycle dynamics. Monetary policy in most regions has shifted course toward
Based on our view that the global economy is mid-cycle, we remain overweight overall risk. However, we believe with risk assets seemingly priced for compelling opportunities, they are also more vulnerable to exogenous …
The COVID-19 crisis spurs cohesion, but fresh challenges await The economic shock of COVID-19 and mounting concerns over climate change have fostered improved coordination among European policymakers. We believe this has reduced left tail risks and set the stage for
As curious as it may sound, few asset allocation primers describe portfolio models while connecting them to each other. This article does so by describing and contrasting the mechanics of standard asset allocation models, including the utility-based, Markowitz, Kelly, risk
Executive Summary Vaccine-driven reopenings propelled U.S. economic growth in the first half of this year, leading to a significant uptick in inflation. While PIMCO believes that today’s high levels of inflation will likely prove transitory, we believe the Federal Reserve
Executive Summary As inflation spiked in the second quarter of 2021, debate about its transitory or permanent nature became more heated. Yet, as is sometimes the case with broad controversies, a lack of definition goes with a lack of comprehension.
SUMMARY The global economy is in a mid-cycle expansion, following peaks in policy support and growth, and what is likely a transitory spike in inflation. We expect global growth to moderate to a still abovetrend pace in 2022. Growth-oriented assets, such as equities
For corporate pension funds, increased exposure to long credit could help: Close the spread duration gap: European corporate pension funds are generally underweight spread duration versus their liabilities. In the current market environment, wider spreads offer an opportunity to invest
The COVID-19 pandemic pummeled financial markets, but liquidity and fundamentals are coming back. Even as the humanitarian and economic crises of the coronavirus pandemic expand, policymakers have been reacting with unprecedented speed and support, and financial markets have begun to
Cyclical Outlook Following the longest expansion on record, the global economy is currently plunging into what could easily become one of the deepest but also shortest recessions in modern times. However, business cycle history offers new clues for what is
Executive Summary We believe the COVID-19 outbreak will peak in May or June, or in summer, to be followed by a meaningful economic recovery. However, the path to that destination remains highly uncertain and will likely be accompanied by disruption
We discuss portfolio positioning for our outlook of economic momentum recovering in 2020, but with certain risks at elevated levels. The past decade marked a tremendous return environment for most asset classes. 2019, in particular, was a banner year for
The outlook for the global economy has improved over the past three months, but there may be less capacity to combat a recession when it comes. We discuss seven key macroeconomic themes we expect in 2020 and implications for investors.
The outlook for the global economy has improved over the past three months, but there may be less capacity to combat a recession when it comes. We discuss seven key macroeconomic themes we expect in 2020 and implications for investors.
Why are negative nominal interest rates so troubling? Economic theory favors real rates, which have already been negative in most developed countries for some time. In theory, lowering the nominal policy rate into negative territory should produce many of the
Competing dynamics have kept U.S. inflation largely stable, but the balance may be shifting After the turbulence of the 1970s and early 1980s, U.S. inflation entered a remarkably stable period that has persisted for the past three decades. As Figure
A reprieve in trade tensions between the U.S. and China bolstered investor confidence in October even as political uncertainty increased around the globe. Washington and Beijing announced details of a potential deal – coined as “phase one” – for the
Despite an optimistic start to September, mixed geopolitical developments weighed on investor sentiment over the month. Trade tensions between the U.S. and China eased somewhat as September began: China exempted certain U.S. agricultural products from additional tariffs, and President Donald
The world’s biggest telecommunications companies spent hundreds of billions of U.S. dollars to build the pipes that undergird the internet, yet they weren’t the big winners. Instead, the giants of search, social media, and streaming media have garnered most of
In depth Companies issue both debt and equity to finance their operations, and their valuations should be linked to the enterprise value of the firm. However, due to investor segmentation, the capital market imposes little discipline in valuing the two
Years of persistent low yields across much of the global fixed income market have spurred many investors to look lower down the credit spectrum in search of yield, or to increase their allocation to equities, in an effort to meet
The Federal Reserve lowered its target policy rate for the first time in over a decade, ending one of the longest hiking cycles in the past 30 years. While the cumulative increase in the federal funds rate of 225 basis
Behavioral scientists are skilled at analyzing why we make mistakes, and financial and investment decisions have been a ripe field to till. The challenge lies in overcoming our biases that result in poor decisions, particularly in today’s late economic cycle
Executive Summary Over the secular (three- to five-year) horizon, growth in China will likely slow somewhat, and we expect some form of resolution of the current U.S.– China trade conflict. Longer-term, though, tensions will remain, as the two nations compete
M idstream energy infrastructure companies have, in our view, generally emerged from the balance sheet and nancing challenges that had plagued the sector since 2014. With these issues now largely in the rearview mirror, oil and gas master limited partnerships
Secular Outlook 2019 Major secular drivers could disrupt the global economy and financial markets over the next three to five years. We share our views on risks and opportunities ahead.
Viewpoint April 2019 U.S. corporate bond markets have transformed in the past few years as the proportion of BBB rated credit has swollen. There’s little room for error, as we noted back in January 2018. Where do we stand now?
After a rip-roaring recovery from the miserable end to last year, it is easy to think of reasons to take a more cautious view of the prospects for world equity markets. In particular, analysts have steadily lowered profit forecasts around
Viewpoint April 2019 U.S. corporate bond markets have transformed in the past few years as the proportion of BBB rated credit has swollen. There’s little room for error, as we noted back in January 2018. Where do we stand now?
After a rip-roaring recovery from the miserable end to last year, it is easy to think of reasons to take a more cautious view of the prospects for world equity markets. In particular, analysts have steadily lowered profit forecasts around
Emerging Markets Outlook Emerging markets (EM) have been fast out of the gate in 2019, recalling last year’s strong start and subsequent stumble. While we are constructive on the prospects for EM performance in the year ahead, we think the
Cyclical outlook march We believe short-term interest rates in the U.S. are now anchored in The New Neutral, as global growth keeps synching lower.
Risk assets rallied further in February due to optimism on US-China trade talks, low volatility, and positive sentiment from the Federal Reserve’s dovish pivot in January. As US Treasury prices declined, the rate curve steepened, with two-year and 10-year rates
Multi-Factor Strategies A “factor” is a generic label for company and stock price characteristics that provide the common sources of return across a broad universe of equity securities. For example, the value factor includes stocks that are inexpensive relative to
Viewpoint11 For credit investors, the equity market can be an important source of information about growth expectations, and at times can serve as a leading indicator. However, recent developments in some defensive sectors – traditionally favored by equity and credit
Asset Allocation Views As the economic expansion aged and volatility increased throughout 2018, consensus shied from viewing the U.S. expansion as likely to continue for the foreseeable future to believing that we are in the late stages. We believe we
Viewpoint The fourth quarter of 2018 witnessed an uptick in credit market volatility, as investors grew increasingly risk-averse in the face of falling equity markets, ongoing U.S.–China trade tensions and geopolitical risks such as Brexit. Broader market weakness spilled over
Asset Allocation Outlook CIO Investment Outlook As the economic expansion aged and volatility increased throughout 2018, consensus shifted from viewing the U.S. expansion as likely to continue for the foreseeable future to believing that we are in the late stages.
We propose a functional principal components method that accounts for stratified random sample weighting and time dependence in the observations to understand the evolution of distributions of monthly micro-level consumer prices for the United Kingdom (UK). We apply the method
The Bank’s mandate is to conduct monetary policy to promote the economic and financial well-being of Canadians. Canada’s experience with inflation targeting since 1991 has shown that the best way to foster confidence in the value of money and to
Monthly Market Update | January 2019 December’s equity market sell-off led global equity markets into the red, marking the first time that U.S., non-U.S. developed, and emerging market equities all ended the year in negative territory since 2008. In fact,
Maintaining flexibility, being currency aware and searching out pockets of values are themes for 2019. PIMCO’s European wealth management team recently met to discuss the state of markets and our outlook for intermediary clients in Europe. Drawing on a survey
