Today’s late-cycle environment gives investors an opportunity to re-evaluate the risk and return potential of their portfolios. Since the depth of the financial crisis, core stock and bond allocations have delivered exceptional returns with modest volatility. But future returns will likely be muted even as risk increases.
Discussions and debates at this year’s World Economic Forum took a soul-searching turn with Davos organizers and delegates agonizing over the future of globalization in a world marked by nationalism, protectionism and social tensions based on economic imbalances.
Akin to the famed Stanford Marshmallow study on delayed gratification, deferral of Social Security income often maximizes lifetime benefits, particularly for those with above-average life expectancy.
We are skeptical Canada can shift its growth model, and our investment outlook for Canada is cautious as a result.
Following this week’s meeting of the Federal Open Market Committee (FOMC), the Fed issued a statement that more forcefully signaled its intention to be cautious in the face of a more uncertain outlook. Policymakers also signaled that they view the current stance of monetary policy as more or less neutral. Therefore, investors should expect the Fed to keep rates steady, for now.
In recent months China has rolled out tax cuts and incentives to boost consumption over investment while taking steps to further open its capital markets – a shift in approach that seems to accept a natural slowing in growth over time and to acknowledge the costs of an overreliance on credit growth.
We expect market volatility to continue in 2019, creating opportunities for the Income Fund.
In his first press conference of 2019, European Central Bank (ECB) President Mario Draghi said risks surrounding the eurozone growth outlook have shifted to the “downside,” versus the “broadly balanced” risks he discussed just one month ago when the bank ended net asset purchases.
While we believe the shutdown on its own would have only a modest impact on growth, the...
We are focused on identifying country-specific opportunities and carefully selecting credit positions where we see value and very low default risk.
In our view, a combination of positive macroeconomic factors is likely to keep prepayment speeds higher than the market projects.
In our outlook for 2019, we believe politics and policy out of Washington will continue to drive – and in some cases, weigh on – markets, much like they did in 2018. Investigations and manufactured crisis are likely to contribute to uncertainty. Trade tensions persist, though on a more positive note, relations between the U.S. and China seem to be improving.
With the effective fed funds rate now only slightly below the range of estimates for neutral monetary policy and few signs of economic or financial market overheating, we believe that the Federal Reserve is likely to hold rates steady in March, interrupting its pattern of quarterly interest rate hikes.
Richard Thaler and Emmanuel Roman discuss behavioral science and investing.
Tighter financial conditions and slower global growth have weakened arguments that U.S. monetary policy will be restrictive in the coming years to alleviate the risk of economic overheating or growing financial imbalances.
Five key macro debates are likely to shape the economic and market outlook for 2019.
-Global market performance remained challenged amid lingering volatility. -Concerns about softer growth, coupled with comments from the Fed, tempered market expectations for the path of future rate hikes. -An assortment of geopolitical developments continued to capture attention in November.
A brief monthly update on what's happening in the municipal bond market.
We believe markets are now broadly priced for an extended period of the status quo – where the current impasse remains, but the UK remains in the EU.
Recent fundamental changes in the leveraged finance markets mean that actively managing credit exposure is more important than ever.
Will the ECB have sufficient firepower – and support from the population – to spur the economy when the next recession arrives?
We see a synchronized global slowdown in 2019. We position cautiously but anticipate opportunities ahead.
PIMCO has mapped the SDG sustainability reporting of 246 companies globally with the goal of encouraging enhanced disclosure.
OPEC and key partners opted for a middle path coming out of the 175th meeting of the OPEC Conference, agreeing to cut oil production by 1.2 million barrels per day (bbl/d) from October levels (an even steeper cut than versus November levels). We expect the move to support prices in the low $60s/bbl for Brent crude and in the mid-$50s for WTI.
In this issue, Research Affiliates discusses the market impact of the U.S. midterm elections and its view of what differentiates All Asset’s positioning from its peers.
The combination of trade tensions, U.S. rate hikes and weaker global trade growth has weighed on emerging markets (EM) this year.
As the Federal Reserve embarks on a review of its long-run monetary framework, questions about its inflation target are resurfacing. We believe now is the time for change.
Federal Reserve Chairman Jerome Powell’s speech on 28 November helped stir a market rally as investors interpreted his comments as more dovish and favorable to risk assets.
Many investment portfolios that rely heavily on stock-bond diversification to manage risks may not be protected against inflation surprises. Real assets offer a solution.
The incoming Mexican government’s costly plan to cancel the new Mexico City airport has fueled concerns that President-elect Andrés Manuel López Obrador will enact a populist agenda and squander the country’s sound financial position.
Asset allocation decisions can be challenging for investors during the later stage of the business cycle. Focusing on quality is likely the best way to manage the transition from late expansion to a potential recession.
As we approach the holiday season, most investors are beginning to think about escaping to somewhere far and exotic or spending time with family and friends. Unfortunately, while our social calendars are working overtime, markets don’t always take a break during the festive season.
Core U.S. Consumer Price Index (CPI) inflation rebounded in October, though not as much as expected, driven largely by a bounce in used car prices. The year-over-year rate ticked down to 2.1%, and evidence of tariff-related price increases was mixed.
Volatility returned and pulled markets across the globe into the red. Slowing growth momentum outside the U.S. further weighed on sentiment. Political developments from Latin America to Europe were a source of both uncertainty and assurance for markets.
Financial media and investors have been focusing on the BBB segment of the U.S. investment grade (IG) corporate bond market this year.
We expect volatility as the process moves forward, along with a potential rise in UK sovereign yields and strengthening of the pound, though some Brexit-related risk premium is likely to remain.
Index returns and traditional active management may fall short, so PIMCO StocksPLUS Small takes a different path to seek small cap alpha.
For investors focused on Sino-U.S. trade tensions, it may come as a surprise that China ran a current account deficit in the nine months of 2018, its first since 1993. The $12.8 billion deficit is only about 0.1% of GDP on an annualized basis.
The U.S. midterm elections played out much as expected, with Democrats picking up the 23 seats (and more) needed to retake the majority in the House of Representatives and Republicans easily defending their majority in the Senate.
This may be an opportune time for insurance companies to consider high-grade emerging markets.
Eurozone GDP growth was very soft in the third quarter, coming in at 0.6% for the three months to September on a seasonally adjusted annualized basis, against consensus expectations of around 1.5%. While the release is disappointing, we caution against extrapolating this weakness in quarters ahead.
European bank capital securities, the term used to refer to subordinated debt instruments issued by financial institutions, have had a challenging 2018. Spreads on Additional Tier 1 (AT1) bonds are over 150 bps wider than in January, driven by uncertainty over Italy and Brexit negotiations, combined with heavy issuance, particularly in the U.S.-dollar-denominated market.
If you live in the United States, it is hard to escape news of the upcoming midterm elections on 6 November. But for investors, are these midterms really significant?
Anti-establishment candidate Jair Bolsonaro prevailed as expected in Brazil’s presidential election on 28 October, having run on a socially conservative “more Brazil, less Brasilia” platform. This included promises to reduce corruption, increase security, allow gun ownership and oppose the legalization of abortion. It was the first time since 2002 that Brazil’s Workers’ Party (PT) did not win the presidency.
The current U.S. economic expansion is now the second-longest in the postwar era, and while it may have more room to run, we believe a recession is likely over the three- to five-year horizon. As U.S. taxpayers think about positioning their portfolios, we see three key reasons why the tax-exempt municipal market may be attractive late in the cycle.
Equity index futures are among the most liquid and cost-effective ways for investment managers to capture the returns of major stock market indexes such as the S&P 500 and Russell 2000 – especially now that financing costs have cheapened.
Global growth has not only plateaued in 2018, it has also become more uneven across regions this year. We’re seeing increasing economic divergence and differentiation between and within asset classes, both of which are typical of an aging expansion.
Alternatives allocations are becoming more mainstream in wealth management portfolios, though implementation varies greatly among financial advisors.
While trade policy has dominated headlines, we believe investors should focus on the collapse of Western Canadian Select (WCS) oil prices relative to global benchmarks, which represents the biggest exogenous risk to the Canadian economy.
