The market’s overwhelmingly favorable reaction to President Trump’s first speech to a joint session of Congress was not necessarily surprising: President Trump veered away from the more protectionist and nationalistic tone of his inaugural address to instead deliver a more hopeful, conciliatory and unifying speech.
PIMCO
Commentary
Securing the Soft Landing
In the wake of pandemic shocks, economies appear more “normal” than at any time since 2019. Yet policy rates remain elevated.
Commentary
The Alpha Equation: Myths and Realities
Alpha (α) is a fundamental yet poorly understood concept in finance. Simply put, it is the difference between the return of an investment and that of a risk-adjusted benchmark. In a more advanced definition, alpha is the residual in an asset pricing equation (see Appendix A). Alpha is what active managers strive to achieve and passive managers do not pursue.
Commentary
Starting With a Bang: Fed Cuts Policy Rate
We believe the Fed is on a path to continue to cut rates over the next several meetings to realign monetary policy with a now more “normal” U.S. economy.
Commentary
Cuts and Consequences
Balanced risks to inflation and employment indicate it’s time for the Fed to normalize interest rates, enhancing a positive backdrop for bonds.
Commentary
China's Growth Evolution: Opportunities and Challenges for the Global Economy
China's economic transformation presents both challenges and opportunities for global markets.
Commentary
Powell on Fed Policy Moves: The Time Has Come
In his annual Jackson Hole speech, Fed Chair Powell assessed the post-pandemic U.S. economy and suggested rate cuts are coming soon.
Commentary
Summer of Dispersion
In this PIMCO Perspectives, we explore the dispersion playing out across monetary policy and financial markets.
Commentary
Fed Sets Stage for Rate Cuts Amid Growing Confidence on Inflation
The central bank’s latest policy statement and Chair Jerome Powell’s remarks suggest that an initial interest rate cut could come as soon as September.
Commentary
ECB: Next Stop, September
While the European Central Bank kept policy rates unchanged, the next cut is likely to be delivered soon.
Commentary
Developed Market Public Debt: Risks and Realities
In the post-pandemic fiscal landscape, government debt trajectories may be volatile, but appear broadly sustainable.
Commentary
June CPI Marks Progress Along the Last Mile to Inflation Target
A second straight month of encouraging U.S. core CPI data supports an initial Federal Reserve rate cut as early as September.
Commentary
Navigating Public and Private Credit Markets: Liquidity, Risk, and Return Potential
Comparing public fixed income and private credit markets involves weighing factors related to liquidity, transparency, credit quality, risk premium, and opportunity costs.
Commentary
Fed Policy: One Month of Good Data Is Not Enough
Good news on U.S. inflation in May did not sway the Federal Reserve to signal interest rate cuts could come sooner.
Commentary
ECB: Lower Cruising Altitude
While the European Central Bank cut policy rates by 25 basis points to 3.75% on its deposit facility, the trajectory beyond June remains unclear.
Commentary
Yield Advantage
The global economy continues to recover from pandemic aftershocks, including trade dislocations, outsize monetary and fiscal interventions, a prolonged inflation surge, and bouts of severe financial market volatility. At PIMCO’s 2024 Secular Forum, we explored how the aftereffects of those disruptions are producing some unexpectedly positive developments while introducing longer-term risks.
Commentary
April Inflation Report Unlikely to Alter Fed’s Path
April’s U.S. inflation report likely offers some comfort to Federal Reserve officials, but rate cuts are unlikely until we see a more substantial deceleration in inflation.
Commentary
Income Fund Update: Capitalizing on the Global Opportunities in Fixed Income
With the potential for higher-for-longer yields across countries, we see the global fixed income opportunity set as the most attractive in years.
Commentary
The Cost of Cash: A $6 Trillion Question
In this PIMCO Perspectives, we examine how the return of elevated bond yields comes at an opportune time to consider shifting out of cash.
Commentary
When Markets Diverge, Opportunities Emerge
Shifting dynamics among global economies and markets present a range of opportunities for multi-asset portfolios.
Commentary
The Fed: Stuck On Hold for Now
Despite the reacceleration of inflation and enduring labor market strength, the Fed remains focused on downside risks.
Commentary
Will the True Treasury Term Premium Please Stand Up?
Various methods to estimate this key bond market gauge differ on details but appear to signal rising investor compensation.
Commentary
ECB: Eyeing a June Rate Cut
While the European Central Bank refrained from declaring victory at its April meeting, a June rate cut seems increasingly likely.
Commentary
Persistent Inflation Pressures Could Delay Fed Action
The March U.S. inflation report and other macro data will likely prompt a change in the Federal Reserve’s trajectory in 2024.
Commentary
Diverging Markets, Diversified Portfolios
The global investment landscape is set to be transformed in the months ahead as the trajectories of major economies diverge more noticeably.
Commentary
Shocking Bonds: Evaluating Advisor Fixed Income Portfolios as the Fed Enters Its Next Phase
After two volatile years, we believe conditions are especially compelling for fixed income.
Commentary
One Hike, Three Hints, and a Surprise Rate Cut
Recent signals from major central banks suggest challenges ahead with easing monetary policy amid above-target inflation.
Commentary
Bank of Japan’s Policy Shift Ushers in a New Era for Investors
The Bank of Japan (BOJ) has bid farewell to its negative interest rate policy (NIRP), yield-curve control (YCC) and quantitative and qualitative easing (QQE), marking the end of an era of extraordinary monetary easing.
Commentary
Fed Readies for Rate Cuts: Back Toward Neutral, or Mid‑Cycle Adjustment?
Federal Reserve officials appear locked in for multiple rate cuts this year, despite inflation reaccelerating – raising questions about the speed and timing of this easing cycle.
Commentary
The Crude Calculus: Predicting Oil’s Next Moves Amid Global Uncertainties
OPEC+ strategies and geopolitical tensions could roil markets.
Commentary
Real Assets: Bolstering Portfolios as Inflation Lingers
Adding real assets to a stock and bond portfolio can help boost returns and smooth volatility when inflation runs above 2%.
Commentary
Bond Markets Overlook U.S. Debt Trajectory, For Now
Debt levels will likely continue to rise absent policy changes, and the yield curve is likely to steepen.
Commentary
Income Fund Update: Compelling Yields Today, Potential Price Appreciation Tomorrow
Many investors remain in cash, but we think it’s time to shift exposure to bonds.
Commentary
Fed Slowly Building the Confidence to Cut
The Federal Reserve sees progress on inflation, but wants more certainty before it’s prepared to lower the policy rate.
Commentary
ECB Firmly on Hold
While interest rates have presumably peaked, we remain skeptical that rate cuts will be delivered as forcefully as the market expects.
Commentary
Munis Cap 2023 With Big Rally; Fundamentals Remain Strong
Municipals experienced their strongest two-month performance since 1986 during the final two months of 2023.
Commentary
COP28: Climate Issues Share Center Stage With Oil and Gas
There are material short- and long-term implications for hydrocarbon markets following the COP28 meeting in Dubai, including tailwinds to oil.
Commentary
November Municipal Market Update: Looking Past the Negative Municipal Credit Headlines
Municipal bonds posted their best performance of the year, and we believe municipal credit conditions remain strong.
Commentary
Rethinking Retirement Spending Rules: A Market‑Based Approach
Starting portfolio yields may be a better guide to optimal spending than knowledge of future market returns.
Commentary
Fed’s Dovish Pivot Reflects Lessons From History
The market anticipates a swift shift in the Fed cycle.
Commentary
ECB Remains Attentive and Focused
While the ECB is unlikely to raise rates further, we remain skeptical that it will deliver rate cuts as early as the market expects.
Commentary
Mind the Supply: The Counterintuitive Impact of Higher Rates on U.S. Housing
The dearth of homes for sale has underpinned the housing market’s surprising resilience and may further lift home prices despite reduced affordability.
Commentary
Prime Time for Bonds
In our 2024 outlook, bonds emerge as a standout asset class, offering strong prospects, resilience, diversification, and attractive valuations compared with equities.
Commentary
Despite Resilient Data, Fed Signals Prolonged Pause
Tighter financial conditions prompted Federal Reserve officials to take a step back from data dependence, and suggest a higher bar for future hikes.
Webinar
Preparing to Pivot: Clients, Cash, and Economic Outlooks
Volatility and uncertainty seem to be on the horizon, and though many investors are eager to park in cash and money markets, opportunities exist that can protect client wealth and bring in a better return. Short-Term bonds are a potential defensive play.
Join the experts at PIMCO for a webcast that explores the current market environment and looks at strategies that take advantage of the front-end of the curve.
Commentary
Inflation Headache Remains for the Fed
The latest inflation report raises the odds of further Federal Reserve action.
Commentary
Post Peak
Our September Cyclical Forum was the first to be held in London, where the economic situation today reflects what’s happening around the world.
Commentary
Major Central Banks Maintain Hard‑Line Stance on Inflation
“Restrictive for longer” is now the mantra as monetary policymakers seek to bring inflation reliably to target.
Commentary
Understanding the Rise in Bond Yields: Implications and Opportunities for Investors
The spike in bond yields presents an opportunity for fixed income investors to earn capital gains and diversify portfolios.
Commentary
Specialty Finance: The $20 Trillion Next Frontier of Private Credit
A liquidity gap is growing as banks curtail specialty lending, providing specialty finance investors opportunities for potential better risk-adjusted returns than we’ve seen since the GFC.
Commentary
Navigating Credit Markets Today – A Q&A With Mark Kiesel and Jamie Weinstein
Public credit markets offer high quality investments with attractive yields and downside resilience, while we see growing longer-term opportunities in private markets.
Commentary
Fed Seems Confident in Soft Landing, But We See Risks
The Federal Reserve forecasts only a modest uptick in U.S. unemployment next year as inflation cools, but history and current labor market trends make us less certain.
Commentary
ECB Prioritizes Fighting Inflation Above Avoiding Recession
The European Central Bank is likely at or very near its peak policy rate, but we don’t expect rate cuts in the near term.
Commentary
Shifting Macro Trends in the Aftershock Economy
PIMCO’s Global Advisory Board discusses economic and geopolitical factors shaping the long-term global outlook.
Commentary
Local Government Financing Vehicles: A Growing Risk for China’s Economy?
We believe idiosyncratic credit events may occur over the next 12 months, but systemic bank risk is remote.
Commentary
Why Now Is a Good Time to Invest in Commodities
Commodities stand to benefit from underinvestment and the clean energy transition.
Commentary
Income Fund Update: Attractive Yields, Resilient Returns
We see compelling value in high-quality, liquid fixed income assets that may offer potential resiliency if the economy weakens.
Commentary
U.S. Downgrade a Reminder That Rising Deficits Can Have a Cost
The sovereign credit rating cut is unlikely to significantly change views toward U.S. Treasuries, but questions about debt sustainability may grow louder over time.
Commentary
BOJ Moves Toward Phasing Out Yield Curve Control
The Bank of Japan announced changes that could allow its yield curve control program to expire gradually if economic conditions are favorable.
Commentary
Fed Cycle Enters Data‑Dependence Phase
Amid an outlook for slower growth and more moderate inflation, the Fed shifts to data dependence.
Commentary
Bond Market Outlook: Valuations Suggest Potential for Equity‑Like Returns With Less Risk
High-quality fixed-income assets may offer the best return potential in more than a decade along with diversification benefits as a likely recession approaches.
Commentary
U.S. Inflation Outlook: A Meaningful Shift in the Second Half of 2023
After stubborn U.S. inflation in the first half of 2023 kept the Federal Reserve raising rates, June’s softer inflation report suggests July may mark the end of the hiking cycle.
Commentary
Fiscal Arithmetic and the Global Inflation Outlook
Debt-financed fiscal policy is driving much of today’s high inflation, but as pandemic-era measures fade, central banks will likely return to their key role in managing price levels.
Commentary
ECB Policy Rates Not Peaking Yet
The European Central Bank (ECB) hikes rates and signals more tightening ahead.
Commentary
Real Estate Reckoning
Our long-term outlook for commercial real estate investing argues for a flexible, long-term approach to seize opportunities in debt and equity investments across the real estate landscape.
Commentary
Rising Macro Risks May Limit Fed From Reaching Its Projected Peak
The Federal Reserve paused in June but raised its estimates for the policy rate later this year. We expect a July increase but remain skeptical about subsequent hikes.
Commentary
ECB Policy Rates Not Peaking Yet
The European Central Bank (ECB) hikes rates and signals more tightening ahead.
Commentary
Rising Macro Risks May Limit Fed From Reaching Its Projected Peak
The Federal Reserve paused in June but raised its estimates for the policy rate later this year. We expect a July increase but remain skeptical about subsequent hikes.
Commentary
The Aftershock Economy
The first few years of the 2020s have seen a number of acute economic, financial, and geopolitical disruptions on a worldwide scale, and it will take time for the ultimate consequences of these shocks to be fully felt.
Commentary
When High Alpha Met Low Beta
An in-depth analysis of hedge fund performance demonstrates that, over the past 15 years, lower-beta hedge fund styles have generally achieved higher alpha, aligning with investors' objectives of maximizing returns and diversification.
Commentary
Income Fund Update: Building Resilience and Harnessing Yield in High Quality Assets
Despite economic uncertainty, we see compelling value in high-quality, liquid assets that we view as more resilient in the face of a potential recession.
Commentary
Spring Brings Cautious Optimism to U.S. Housing Market
Although affordability remains an obstacle, recent data offer reasons to be more constructive as broader conditions still appear supportive of home prices.
Commentary
Whether Pause or Pivot, Look to Bonds
An allocation to fixed income may help investors navigate a potential recession as well as uncertainty around the Federal Reserve’s policy trajectory.
Commentary
Preparing for the Pivot: Key Takeaways From Our 2022 Advisor Fixed Income Portfolio Review
Higher bond yields and improved total return potential may offer advisors a compelling opportunity to move cash off the sidelines.
Commentary
Data Underpinning CPI Report Suggest U.S. Inflation Moderated Materially in March
March inflation data may put the Federal Reserve close to its terminal policy rate this cycle, if it hasn’t already reached it.
Commentary
Fractured Markets, Strong Bonds
History suggests the lagged economic effects of tighter central bank policy are arriving on schedule, but any eventual normalizing or even easing of policy will still likely require inflation to decline further.
Commentary
Fed Weighs Stubborn Inflation Against Banking System Stress
Slower credit growth may curtail broader U.S. economic growth, taking pressure off the Federal Reserve.
Commentary
The ECB Hikes Rates Amid Financial Market Volatility
In a dovish move, the central bank raises rates by half a point.
Commentary
Bank Failures and the Fed
The failure of Silicon Valley Bank raises questions for Fed policy and economic growth.
Commentary
Data Alters Market's Expectations for Peak Policy Rate But Not Outlook for Fed Cuts
Strength in employment and inflation has caused markets to raise the implied terminal rate while still expecting the Fed to normalize policy – which is different from easing – in 2024.
Commentary
Markets Are Finally Listening to Fed’s ‘Ongoing Increases’ Message
Bond markets are pricing in additional Federal Reserve interest rate hikes, acknowledging the central bank’s emphatic resolve to tame inflation despite the likely trade-offs.
Commentary
The ECB is Not Done Yet
The European Central Bank raised its policy rate, and more hikes are coming.
Commentary
Fed Seeks to Balance Competing Risks
Investors face mixed signals between the Federal Reserve’s policy guidance and recent economic developments.
Commentary
Trying to Make Apple Juice from Oranges: The Problem with Comparing Market Pricing and Fed Projections
As investors seek to pinpoint market expectations for Federal Reserve policy, it’s critical to consider not just rate projections and derivatives pricing, but the degree of uncertainty and distribution of outcomes.
Commentary
European Outlook: Less Downside Now, But Caution Still Warranted
Focusing on high quality and liquidity when taking risk in portfolios will be key in 2023, as pressure on monetary policy remains intense.
Commentary
Cyclical Outlook Key Takeaways: Strained Markets, Strong Bonds
After enduring one of the worst years on record across asset classes, investors should find more cause for optimism in 2023, even as the global economy faces challenges.
Commentary
ECB Hikes, and Indicates Higher Rates Coming
The European Central Bank is likely to continue hiking rates next year, but the end point remains uncertain.
Commentary
U.S. Inflation Eased More Than Expected in November as Fed Eyes Pause in Rate‑Hike Cycle Next Year
Falling prices for cars and holiday discounting contributed to softer U.S. inflation, creating more room for the Fed to potentially dial back its hawkish stance.
Commentary
Plan Design in an Inflation‑Sensitive World
A multi-real-asset strategy may help plan participants preserve and grow purchasing power, enhance portfolio diversification, and mitigate inflation risks.
Commentary
Higher Bond Yields Can Be Fundamental to a Recession Investing Playbook
How we’re thinking about investing against a backdrop of inflation uncertainty, geopolitical tension, and likely recession.
Commentary
What to Expect From Divided Government
A split U.S. Congress in 2023 will likely limit fiscal policy, but could be positive for equity markets.
Commentary
Risk‑Off, Yield‑On
With interest rates higher amid a challenging macro environment, we see a compelling case for bond allocations and are cautious about higher-risk investments.
Commentary
What’s Behind the Slowdown in U.S. Inflation
Core inflation came in below expectations for October and should moderate in 2023, but likely with bumps in the road ahead.
Commentary
Peak Inflation May Hint at Peak Rates in Emerging Markets
Inflation is receding and real interest rates are climbing in EM after a year of tightening monetary policy.
Commentary
Surging September CPI Bolsters Case for Further Outsize Fed Hikes
Core inflation in the U.S. outpaced expectations for September and may fortify the Federal Reserve’s hawkish resolve.
Commentary
OPEC+ Production Cuts Show Energy Security Has a Price
The OPEC+ plan to curb oil production complicates the global economic, inflation, and geopolitical outlook and will likely lead to higher prices for key commodities.
Commentary
U.K. Market: Growth, But at What Price?
U.K. financial market volatility is likely to remain high, and the longer-term outlook likely depends on future monetary and fiscal policy.
Commentary
With Aggressive Rate Forecasts, Fed Seeks to Reinforce Commitment to Taming Inflation
The Federal Reserve released new economic projections suggesting interest rate hikes will be faster and larger than previously forecast.
Commentary
Proceed With Caution: Opportunities for Cash and Defensive Income Amid Uncertainty
We believe short-dated bonds can offer attractive yields, flexibility, and a means to proceed cautiously as central banks continue to raise interest rates.
Commentary
Hot August Inflation May Shift Fed’s Interest Rate Trajectory Higher
The Federal Reserve may be pressured to target a higher terminal fed funds rate as it seeks to tame U.S. inflation expectations following strong price rises in August.
Commentary
How Can Policymakers Improve the Functioning of the U.S. Treasury Market?
Widening participation in the Fed’s standing repo facility and bond buying programs could mitigate another liquidity crisis in the Treasury market.
Commentary
Spotting Opportunities and Risks Across the EM Investment Universe
Emerging market valuations appear attractive, but country-specific risks can be critical to monitor amid global inflation and rising interest rates.
Commentary
Fed Affirms Hard‑Line Approach to Taming Inflation
In Jackson Hole, Federal Reserve officials unequivocally emphasized their commitment to bringing inflation under control – even as the U.S. economy slows.
Commentary
Understanding the Completion Mandate Value Proposition
The value of completion mandates for defined benefit plans depends on the stage of the de-risking journey.
Commentary
Income Fund Update: Higher Yields, Wider Spreads, Greater Opportunities
The market contraction presents better opportunities than we’ve seen in years to generate income, which we balance against the need for resilience in the face of a potential recession.
Commentary
European Front‑End Markets: Valuation Strikes Back
As the European Central Bank leaves negative policy rates behind, attractive valuations herald a much-improved total return potential.
Commentary
Fed Aims for ‘Modestly Restrictive’ Policy to Counter Inflation
The Federal Reserve affirmed its commitment to price stability, hiking its policy rate 75 basis points again and signaling more tightening to come.
Commentary
What China’s Recovering Supply Chain Means for Global Inflation
Renewed growth in China’s manufacturing activity, coupled with softening developed market demand, should ease some supply-side pressures – but several other inflation risks remain prevalent.
Commentary
Core Inflation Data Could Prompt Dramatic Action at the Fed
June’s U.S. CPI (Consumer Price Index) inflation data likely set alarms blaring in the minds of Federal Reserve officials.
Commentary
Core Inflation Data Could Prompt Dramatic Action at the Fed
June’s U.S. inflation data will likely force central bankers into more restrictive territory – raising the odds of recession.
Commentary
Shelter From the Storm
Amid stormy markets, senior securitized credits hold potential for resilient returns.
Commentary
Key Takeaways From Our 2021 Advisor Fixed Income Portfolio Review
We examine key themes from our review of advisor fixed income portfolios over the past year.
Commentary
Power of Representation: the 'Us'es'
To celebrate Pride Month, four PIMCO executives share their perspectives on inclusion and diversity in the workplace and the importance of visible representation.
Commentary
Assessing Inflation’s Effects Across Emerging Markets
The varied responses of individual countries to global inflationary pressures have contributed to elevated real-rate differentials between developed and emerging markets.
Commentary
Reaching for Resilience
The war in Ukraine has widened global geopolitical fractures, and we see risks of deglobalization and more fragmented capital markets over the secular horizon.
Commentary
Semiconductors: A Less Cyclical Future
The proliferation of semiconductors throughout our economy may drive more durable, less cyclical demand and earnings.
Commentary
All Asset All Access: Managing Portfolios Amid Evolving Market Narratives
Research Affiliates discusses the intriguing long-term outlook for value stocks, and provides insights on the models that underpin its asset class forecasts.
Commentary
Income Strategy Update: Opportunities Ahead
Rising yields, wider spreads, and heightened market volatility are providing an attractive environment, but caution in credit selection is warranted.
Commentary
Credit Where Credit Is Due: Four Common Misconceptions in Public and Private Credit Markets
Heightened market volatility has led to misconceptions about credit, in our view. We dispel four of them here.
Commentary
Bank of Canada: Hike More Now, Less Later
The Bank of Canada embarked on a swift tightening path, but secular forces still weigh on the longer-run interest rate outlook.
Commentary
The Big Freeze: Sanctioning Russia Raises Questions on Other Currencies
Sanctions on Russia’s foreign currency reserves will likely stymie the rise of the Chinese renminbi as a competitor to the U.S. dollar.
Commentary
Real Estate Investing in an Uncertain Environment
Five commercial real estate sectors in markets across the globe have the potential to thrive in this environment.
Commentary
Russia‑Ukraine Ramifications: Not All Trade Is Created Equal
The countries’ weight in global trade is relatively small, but outsize exports of raw and semi-finished goods may portend price hikes across a variety of industries.
Commentary
China Growth Outlook: Counting the Cost of Lockdowns
While Beijing has set an ambitious growth target this year with a generous fiscal stimulus plan, new COVID-19 waves are adding to mounting headwinds amid a slowing global economy.
Commentary
Cash for Calls: Managing Liquidity for Illiquid Investments
A framework for optimizing liquidity in alternative investments.
Commentary
Supply Chain Crisis: Disruption Should Lead to Greater Diversification
Supply chains set to become less dependent on China over time.
Commentary
U.S. Housing Outlook: No Bust After the Boom
Home price fundamentals suggest appreciation will slow but remain resilient.
Commentary
Munis in Focus: 2022 Municipal Market Update
Their track record in periods of rising interest rates suggests municipal bonds could be well-positioned for this year’s market environment.
Commentary
Anti‑Goldilocks: Key Takeaways From the Cyclical Outlook
Russia’s invasion of Ukraine, the sanctions response, and the gyrations in commodity markets cast an even thicker layer of uncertainty on what already was an uncertain economic and financial market outlook before the onset of this horrific war.
Commentary
The New Defined Contribution Landscape
The pandemic hastens the evolution of the DC plan landscape and challenges plan sponsors to evolve.
Commentary
Tug of War: The Fed Begins a Rate‑Hiking Cycle as Inflation Trumps Uncertainty
The U.S. Federal Reserve raised the policy rate at the March meeting and signaled more hikes to come given the risks from high inflation.
Commentary
Income Strategy Update: Investing in Volatile Times
Russia’s invasion of Ukraine and the world’s subsequent sanctions and actions to curtail Russia’s access to the global financial system have thrown financial markets into turmoil.
Commentary
All Asset All Access: Engaging Opportunities Amid Volatile Markets
Research Affiliates discusses their approach to managing risks and targeting opportunities in uncertain environments.
Commentary
Commodities: Time to Shine
Commodities appear attractive amid elevated inflation, lingering supply-demand imbalances and high roll yields.
Commentary
Income Strategy Update: Positioning for Volatility and Interest Rate Uncertainty in 2022
As uncertainty pervades the markets, we are positioning defensively, increasing liquidity and remaining nimble in an effort to generate income amid bouts of heightened volatility.
Commentary
Price Hikes in Retail Goods Spur U.S. Inflation – and the Fed Is Watching
The January U.S. CPI (Consumer Price Index) report indicated a higher pace of inflation than many observers expected.
Commentary
Cash for Calls: A Quantitative Approach to Managing Liquidity for Capital Calls
Studies of private market investments tend to focus on the return premium associated with illiquid assets and their appeal relative to traditional public market assets.
Commentary
Regional Cyclical Outlook for 2022: Post‑Peak Growth and Shifting Policy
by Tiffany Wilding, Allison Boxer, Nicola Mai, Peder Beck-Friis, Vinayak Seshasayee, Carol Liao, Jun Yamamoto, Lupin Rahman of PIMCO, 1/31/22
Much of the global economy has transitioned quickly from an early-cycle recovery to a mid-cycle expansion that now appears to be rapidly progressing toward late-cycle dynamics.
Commentary
The Fed’s Road to Full Normalization
At the January 2022 meeting, the U.S. Federal Reserve signaled an accelerated timetable to normalize policy, but it will be a long process amid an uncertain environment.
Commentary
December CPI Data Suggests U.S. Inflation May Be Stabilizing, But Hasn’t Peaked Yet
The strong inflation report combined with employment data will likely prompt the U.S. Federal Reserve to begin hiking its policy rate in March.
Commentary
Investing in a Fast‑Moving Cycle
Uncertainty has become an ongoing theme in markets, economies, and communities everywhere, and in this environment, PIMCO investment professionals gathered – virtually, once again – for our recent Cyclical Forum.
Commentary
Carbon Cap‑and‑Trade: We See a Compelling Opportunity
We see attractive investment opportunities in California’s cap-and-trade carbon emissions market.
Commentary
Fed Focused on Getting Back Toward Neutral
The Federal Reserve pulls forward rate hike expectations and doubles the pace of tapering in an effort to provide more flexibility to react in 2022.
Commentary
Trends and Transformations in the Global Economy
PIMCO’s Global Advisory Board discusses the longer-term outlook for macro trends and major economies.
Commentary
All Asset All Access: Investment Implications of Inflation Expectations
Research Affiliates discusses the outlook for U.S. inflation expectations, and explains their business cycle model and how it informs portfolio positions.
Commentary
U.S. Inflation Data Appears Consistent With Faster Fed Tapering and Interest Rate Hikes
The risks of continued elevated inflation likely have the U.S. Federal Reserve considering material changes to its policy path.
Commentary
Asset Allocation Views: Opportunity Amid Transformation
Disruptive trends and fatter tail risks highlight the importance of selection within asset classes and regions.
Commentary
European Secular Outlook: The Prospect of More Stability
The COVID-19 crisis spurs cohesion, but fresh challenges await.
Commentary
Amid Inflation Uptick, Valuations Signal Opportunities in Inflation‑Linked Assets
With major central banks likely to exercise patience in the face of price pressures, inflation-linked assets may be attractive allocations.
Commentary
Climate and COP26: Takeaways From Two Delegates
We offer our view of the most significant outcomes from the UN Climate Change Conference.
Commentary
Income Strategy Update: Flexibility to Withstand Pressure
As policymakers withdraw fiscal and monetary support, we believe market volatility will rise, presenting investment opportunities.
Commentary
Energy Volatility Shows Power of Commodities to Influence Inflation
The recent surge in oil and natural gas prices highlights the interconnected nature of energy markets, as well as the complexities of transitioning away from fossil fuels.
Commentary
October U.S. CPI Adds Pressure to Fed Policymaking
Stronger-than-expected U.S. inflation data in October may prompt the Federal Reserve to consider tapering faster and hiking sooner.
Commentary
Down, Not Out: 5 Things to Know About China's Power Crunch
While the recent energy crisis has disrupted China’s economy, we do not expect a significant drag on growth.
Commentary
Inflation Risks Put the Fed in an Uncomfortable Place
The Federal Reserve navigated its tapering announcement without much market volatility, but faces the challenge of managing rate expectations amid elevated inflation risks.
Commentary
Yield Curves Flatten as Investors Rethink Outlook for Monetary Policy
The volatility that has roiled short-term bonds signals a shift in expectations for central bank policy in developed markets.
Commentary
Rising Valuations May Reflect Improved Credit Conditions
We believe the municipal markets should remain strong into 2022, although the good news may already be baked into high quality bond valuations.
Commentary
Focusing on Sustainability and Providing Attractive Income
Combining PIMCO’s innovative ESG (environmental, social, governance) investing approach with its expertise in income investing, this flexible strategy targets a multi-sector, global opportunity set.
Commentary
Age of Transformation
Three transformative trends will lead the world into a radically different macro environment over the secular horizon. Read our long-term outlook and implications to consider when investing.
Commentary
Fed Policy Amid Elevated Inflation Concerns
Elevated risks to inflation expectations appear to have prompted Federal Reserve officials to revise their policy rate hike projections higher.
Commentary
Fed Policy Amid Elevated Inflation Concerns
Elevated risks to inflation expectations appear to have prompted Federal Reserve officials to revise their policy rate hike projections higher.
Commentary
Municipal Bonds: The Advantages of Active Management
The active/passive debate frequently focuses on equities, where active approaches have historically underperformed passive strategies. The story is decidedly different in the world of fixed income, where active managers can more easily exploit mispricing and other inefficiencies.
Commentary
Fundamentals of RAE: Deep Value, Bubble Stocks, and Market Inefficiency
Value has its day in the sun. But are investors learning the right lessons from it?
Commentary
Flexible Fixed Income: How to Navigate the Challenges of 2021 and Beyond
Uncertainty always exists in financial markets.
Commentary
A Dizzying Summer in D.C. as U.S. Debt Ceiling Looms Again
A busy summer on the fiscal front in Washington that’s seen progress on budget and infrastructure legislation could soon give way to another showdown over the U.S. statutory debt ceiling, potentially signaling volatility for investors in the months ahead.
Commentary
All Asset All Access: Evaluating and Managing Long‑Term Inflation Risks
In this edition, Chris Brightman, chief executive officer and chief investment officer of Research Affiliates, explains their outlook on long-term inflation and discusses how investors can prepare for this risk.
Commentary
How SMAs and Interval Funds Can Help Meet Municipal Investor Needs
There are many potential advantages to investing in tax-exempt municipal bonds, but not all advisors are aware of additional strategies and investment vehicles that can help them meet muni-focused client needs.
Commentary
Canadian Housing: Expensive, But Not Bubbly
Just over a year ago, the biggest prevailing worry in the Canadian financial system was the risk of house prices falling in the aftermath of the COVID-19 pandemic.
Commentary
The Well‑Tempered Retiree: Rational Choice in an Uncertain Retirement
Encouraging goal-oriented investing and better-balanced decisions in retirement.
Commentary
Why Yields Fell, and What Happens Next
In our baseline forecast, the recent decline in U.S. Treasury yields will reverse somewhat, as some of the near-term factors pressuring yields lower ebb.
Commentary
Income Strategy Update: Investing Amid Inflation Concerns and Lower Yields
With global growth rebounding amid uncertainties over inflation and COVID-19 variants, investors may want to consider a somewhat more cautious and flexible approach when seeking a consistent yield.
Commentary
Substantial Further Progress? Not Yet, Says the Fed
The Fed stopped short of providing “advance notice,” but a December tapering announcement remains likely.
Commentary
Three Disruptive Trends Set to Transform the Auto Industry
Over the next 10 years, the global automotive industry is expected to face one of the most significant changes in its history – the replacement of internal combustion engine (ICE) vehicles with electric vehicles (EVs).
Commentary
Supply Bottlenecks Likely to Ease by the End of the Year
Global demand for consumer goods has rebounded since the second half of 2020, driven initially by large government stimulus packages and, more recently, by resilient capital expenditures and swift vaccination rollouts in most developed markets.
Commentary
We Have a Deal: U.S. Infrastructure Spending Soon, Tax Increases Likely Later
A bipartisan deal on infrastructure spending would likely be followed by a separate partisan deal funded by tax increases.
Commentary
U.S. Regulators to Leveraged Loan Issuers: Just Do It (Transition to SOFR)
Leveraged loan issuers have lagged other fixed income market issuers in moving to SOFR as a reference rate, posing potential risks to investors as the year-end deadline approaches.
Commentary
Inflation Inflection
Over the past few months, economic recoveries have been uneven across regions and sectors.
Commentary
PIMCO Trends: Managed Futures: Seeking Diversification and Returns
Managed futures strategies have historically delivered attractive returns over the long run with low equity correlations.
Commentary
Monthly Municipal Market Update, May 2021
A brief monthly update on what's happening in the municipal bond market.
Commentary
Top Five Insights from PIMCO’s 2021 ESG Investment Summit: Financing a More Sustainable Future
PIMCO’s annual ESG Summit – hosted virtually this year – aimed to help participants keep pace with the rapidly evolving landscape of environmental, social and governance issues within the world of investing, with a particular focus on the transition to net-zero emissions.
Commentary
Top Five Insights from PIMCO’s 2021 ESG Investment Summit: Financing a More Sustainable Future
Expectations for COP26, the importance of issuer engagement, and growth in sustainability-linked bonds were among the many topics covered.
Commentary
Emerging Markets Through the Looking Glass: Signs of Growth Potential Post‑Pandemic
Natural herd immunity in predominantly young emerging markets populations looks set to offset slower vaccine rollouts, setting the stage for a resurgence in economic growth.
Commentary
China’s Anti‑trust Campaign: Impact on Growth Should Be Limited
In late 2020, China launched an anti-trust campaign focused mainly on big technology firms, aiming to crack down on what the government views as monopolistic practices.
Commentary
A Swift Price‑Level Adjustment, Not an Inflation Spike: April U.S. CPI
We believe the U.S. is undergoing a large price-level adjustment, not shifting to a persistently higher inflation regime.
Commentary
China Property Sector Remains Robust Despite Policy Headwind
Momentum in China’s property market remains strong so far in 2021, driven by healthy demand for housing.
Commentary
Treasury Issuance Could Aid Adoption of SOFR Benchmark
As regulators push to transition away from Libor, sales of Treasuries linked to the successor rate could boost the new benchmark’s credibility and expand nascent markets for related debt and derivatives.
Commentary
Realigning Inflation Expectations
As expected, the Federal Open Market Committee (FOMC) announced no changes to its administered rates following its April meeting, and Federal Reserve Chair Jerome Powell did not provide new information about the Fed’s bond-buying programs.
Commentary
Nuclear Decommissioning Trusts: Broadening the Fixed Income Opportunity Set
Nuclear decommissioning trusts (NDTs), the pools of money accumulated over decades used to dismantle nuclear power plants and safely dispose of radioactive materials, allocate about 40% of their assets to fixed income securities.
Commentary
Rethinking Cash Holdings to Avoid Near‑Zero Yields
Since the disruptions that roiled financial markets in March 2020, investors have turned more to cash and other short-term instruments typically associated with risk aversion and preservation of capital and liquidity.
Commentary
Bank of Canada: Walking a Tightrope
On April 21 the Governing Council of the Bank of Canada (BoC) will meet to discuss monetary policy.
Commentary
Global Chip Shortage: The Winners and Losers
Computer chips, or semiconductors, power everything from cars to consumer electronics, such as PCs, gaming consoles and smartphones.
Commentary
Dealing With an Inflation Head Fake
We forecast a strong global recovery in 2021 amid significant fiscal support, accommodative monetary policy, diminishing lockdowns, and accelerating vaccinations.
Commentary
Will Taxes Rise in the U.S.?
Democrats could begin working on a tax bill later this year, but resulting tax hikes may be weaker and less of a headwind to growth than some fear.
Commentary
U.S. Equity Values: The Three Dogs That Have Not Barked
Stock market bulls can find reassurance in the equity risk premium, which suggests stocks are valued fairly or slightly expensive.
Commentary
SLR Expiration: Treasury Markets Likely to Shoulder the Costs
The Federal Reserve on 19 March announced that the temporary changes to its supplemental leverage ratio, or SLR, will expire as scheduled on 31 March.
Commentary
Fed Policy: Patience Is a Virtue
Following its March meeting, the Federal Open Market Committee (FOMC) released a statement and summary of economic projections (SEP).
Commentary
Focusing on Inflation May Miss the Bigger Risk
As the latest COVID-19 relief bill winds through the U.S. Congress, some economists have been warning that too much stimulus could lead to the economy overheating
Commentary
Surge in Rates May Be Overstating the Case for Inflation
Longer-dated Treasury yields have climbed as markets consider whether economic growth and inflation expectations might accelerate more rapidly. We believe inflation pressures will remain in check and bond yields will be range-bound.
Commentary
Implications of China’s Credit Curtail
China’s economy should see a soft landing as stimulus is reduced, but the drag on global growth may place a burden on developed economies to keep stimulus taps open for longer.
Commentary
An Employment Priority: Women Reentering the Workforce Are Pivotal to U.S. Economic Recovery
One year since the inception of one of the most severe recessions in modern history, women’s engagement in the labor force is crucial to the economic recovery.
Commentary
Valuing Diverse Perspectives
As International Women’s Day approaches, three PIMCO executives share their perspectives on diversity in the workplace.
Commentary
What the Pandemic Taught Us About Target Date Funds
Target date funds should be designed to reduce the risk of rash selling.
Commentary
Municipal Bond Outlook: Recovering at Different Speeds
Political change, continued fiscal support will drive municipal markets in 2021, although outcomes are likely to vary.
Commentary
Fixed Income: Low Yields Don’t Tell the Whole Story
It’s tempting these days for some investors to question the role of fixed income in portfolios. After all, real yields have plunged, potentially leading to less income today and smaller capital gains tomorrow.
Commentary
Monthly Municipal Market Update, January 2021
A brief monthly update on what's happening in the municipal bond market.
- Tax-exempt municipal bonds generated solid performance in January, with high yield munis gaining more than 2% on the month.
- Municipal yields rose early in the month on expectations for higher rates and additional fiscal stimulus.
- Although issuance was relatively light in January, the municipal market experienced strong demand, with four consecutive weeks of fund inflows.
Commentary
Avoiding Turbulence: Fed Policy and Communication in 2021
A clear communication strategy is crucial to managing market expectations around changes in Federal Reserve asset purchases and interest rate policy.
Commentary
LDI Programs: Finding a Better Replacement for Treasury STRIPS
A holistic LDI portfolio may provide a superior liability hedge.
Commentary
Beyond Brexit: Outlook and Risks for the U.K. Economy
Despite seeing major market swings following the 2016 Brexit referendum, we don’t expect Britain’s departure from the European Union (EU) to have any major economic effects in our baseline outlook for 2021 and beyond. Far more important are COVID-19, fiscal policy, and bigger questions around future productivity growth.
Commentary
Tail Winds Provide Lift for Emerging Markets Investments
A confluence of dynamics are set to accelerate global capital flows to emerging markets amid attractive valuations.
Commentary
Monthly Municipal Market Update, December 2020
A brief monthly update on what's happening in the municipal bond market.
Commentary
Don’t Drop the Baton in Retirement: Managing the “Handoff” From Saving to Spending
PIMCO’s “Income to Outcome” framework offers strategies to navigate retirement’s stumbling blocks.
Commentary
Cyclical Outlook Takeaways: Bounded Optimism on the Global Economy
Global output and demand are likely to rebound strongly in 2021, but we see risks that call for careful portfolio positioning.
Commentary
A Narrowly Democratic Congress Could Boost Spending and Growth
With a narrowly Democratic Congress, U.S. fiscal spending is likely to increase on economic relief from the pandemic, infrastructure, and healthcare, boosting the economic rebound.
Commentary
Asset Allocation Views: Early Cycle Investing
In this abridged version of our latest Asset Allocation Outlook, we discuss the opportunities and risks of investing in an early cycle recovery.
Commentary
Today's Credit Opportunities in 5 Charts
How can credit markets help active investors achieve their goals in the present low yield environment? Here are 5 ideas.
Commentary
Monthly Municipal Market Update, November 2020
The U.S. stock market surged in November, erasing October’s losses even amid a rising number of coronavirus infections. Propelled by progress toward potential coronavirus vaccines and hopes for a relatively smooth transition to power for president-elect Joe Biden, major U.S. equity indices closed the month with double-digit gains.
Commentary
Early Cycle Investing: Navigating the Growth Rebound
We believe traditional fixed income should continue to provide a reliable source of diversification against a growth shock, but low rates and the risk of an inflation shock necessitate broadening the menu of diversifiers.
Commentary
Green Light to a Greener Economy: Three Investment Trends
Some of the world’s leading countries have recently announced major sustainability targets. These moves, aimed at making economic recovery faster and more sustainable, will create investment opportunities as well.
Commentary
Harvesting Yield in Emerging Markets
Debt of many emerging market countries can offer robust yields and enhance portfolio diversification, provided the asset manager has the resources and sophistication to avoid potential pitfalls.
Commentary
Implementation Matters: A Review of the Performance of Alternative Risk Premia Strategies in 2020
Wide performance dispersion underscores the importance of portfolio construction.
Commentary
What China’s 14th Five-Year Plan Means for Investors
It will continue to be important to be an active investor during this period of transition and to carefully monitor the impact of policy on credit sectors.
Commentary
Distressed Credit Opportunities on Rise Amid Uncertainties in Middle Markets
Liquidity issues and other business risks could prompt a wave of defaults and restructurings, in turn creating fertile ground for opportunistic investing in distressed credit.
Commentary
Income Fund Update: Navigating an Uneven Recovery
We are cautiously optimistic about economic growth over the next year, but over the longer term, disruptive factors will likely contribute to heightened volatility and lower returns across both fixed income and equity markets.
Commentary
How Active Short‑Term Strategies Can Fill the Void Left by the Diminished Money Market Landscape
Amid an environment of near-zero benchmark and T-bill yields, for a modest increase in risk, PIMCO's short-term strategies may offer higher levels of total return and income for stepping beyond the confines of money market fund strategies.
Commentary
All Asset All Access: Preparing Portfolios for Longer‑term Risks and Contrarian Opportunities
In our view, inflation-fighting asset classes look considerably cheaper and offer higher long-term estimated returns than mainstream stocks and bonds.
Commentary
Monthly Municipal Market Update, October 2020
A brief monthly update on what's happening in the municipal bond market.
Commentary
First the Election, Now the Governing: Fiscal Policy Priorities, Challenges, and Implications
Washington will likely focus on fiscal stimulus immediately – but given the realities of governing and the pandemic, economic recovery will take time.
Commentary
Bundled LDI Portfolios: An Antidote to Historically Low Treasury Yields?
Bundling may help plan sponsors unlock alpha potential and supplement low returns from long Treasury bonds.
Commentary
Will the Bank of Canada Follow the Fed Into a New Inflation Targeting Regime?
Canada’s central bank looks to evolve its policy framework amid concern over disinflationary trends.
Commentary
Escalating Disruption
The pandemic has amplified four long-term macroeconomic disruptors, and fiscal policy – a key swing factor – may hold the key to upside or downside surprises. Read our long-term outlook and learn implications to consider when investing.
Commentary
Assessing China’s “Structural” Monetary Policy
Policy will continue to be carefully calibrated as China walks a tightrope between supporting growth and maintaining financial stability.
Commentary
Emerging Market Bonds: Part of a Resilient Portfolio?
A basket of emerging market bonds may offer the same appeal investors have long sought from U.S. Treasuries.
Commentary
The New Sustainable Finance Principles
Launched in September 2020, the CFO Principles for Integrated SDG Investments and Finance are designed to help create a market for corporate SDG (Sustainable Development Goal) investments.
Commentary
Should the Fed Buy Treasuries or Agency MBS During QE? Yes
We believe the Fed’s mortgage purchase program is helping to bolster economic activity, and accomplishing more than Treasury purchases alone.
Commentary
The Fed's New Guidance: Surprising Is Not Convincing
The lack of market reaction suggests that many investors are not convinced that the Fed’s new guidance represents any material shift in policy.
Commentary
Monthly Municipal Market Update, August 2020
A brief monthly update on what's happening in the municipal bond market.
Commentary
Munis in Focus: 2020 Municipal Market Update
In a challenging year dominated by the COVID-19 pandemic, the municipal market is recovering on the strength of unprecedented federal support.
Commentary
The Role of Bonds in a New Era of Low Yields
Resiliency and diversification potential remain critical in a world with meaningful uncertainty ahead.
Commentary
Back‑to‑School Challenges Are Serious, But They Shouldn’t Scare Municipal Investors
Although the pandemic could make for a chaotic return to school, it is unlikely to create significant municipal credit stress.
Commentary
Back-to-School Challenges Are Serious, But They Shouldn’t Scare Municipal Investors
Although the pandemic could make for a chaotic return to school, it is unlikely to create significant municipal credit stress.
Commentary
Monetary Policy Framework: The Fed Says What, But Needs Help on How
The Federal Reserve released the results of its multiyear framework review alongside a speech by Fed Chair Jerome Powell at the Kansas City Fed’s Economic Policy Forum on 27-28 August. While the announcement came earlier than anticipated, the conclusions were in line with the evolutionary, not revolutionary, changes to the Fed’s framework we have long been expecting.
Commentary
Gold Still Shines Bright
Despite reaching record highs earlier this month, gold remains attractively valued, according to our framework.
Commentary
Monthly Municipal Market Update, July 2020
A brief monthly update on what's happening in the municipal bond market.
Commentary
A Slow and Uneven Recovery Still Likely Despite July’s U.S. Price Bounce
Rising prices in July have led PIMCO to raise its core inflation forecast for 2020, but not 2021.
Commentary
Income Fund Update: Focused on Finding Opportunities in Today’s Markets
Looking across the global opportunity set, we see potential for attractive yield, though uncertainties surrounding the global recovery suggest this is a time to be cautious.
Commentary
Fed Reinforces Commitment to Ongoing Monetary Policy Support
The Federal Reserve wants financial conditions to remain accommodative as it looks to support the U.S. recovery.
Commentary
Worried About Retirement? PIMCO’s Plan to Help Retirement Savings Last a Lifetime
PIMCO’s CEO and its head of retirement outline the firm’s approach to generating retirement income.
Commentary
Europe’s Labor Measures: Short-term Gain, Long-term Pain?
European measures applied to mitigate the effects of the pandemic have contained the unemployment rate in Europe more than in the U.S. While recognizing economic risks from the rising number of COVID-19 cases in the U.S., our forecast sees this success ratio reversing before the end of the year.
Commentary
The Imprint of Monetary Policy on Munis
Municipal bond investors will need to contend with the impact of monetary policy on market prices.
Commentary
June CPI Report Underscores Economic Fragilities
We expect more stimulus, both monetary and fiscal, will be necessary to support the recovery amid the renewed COVID-19 outbreak.
Commentary
Monthly Municipal Market Update, June 2020
A brief monthly update on what's happening in the municipal bond market.
Commentary
New: Today’s Credit Opportunities in 5 Charts
The protracted low-yield environment has left many investors with insufficient returns to meet their goals: how can credit help? Here we highlight where we see 5 credit opportunities.
Commentary
Building Resiliency Amid Uncertainty
After a decade of steady growth and rising asset prices, economies and financial markets were rocked by the COVID-19 pandemic. The global health crisis forced most governments to lock down their communities, halting economic activity almost overnight and causing financial markets to reprice lower at an unprecedented speed.
Commentary
Public-Private Solutions to Safeguard Economies Everywhere
The health crisis creates opportunities to unite historically disparate investor groups to help build economic and market sustainability and resiliency.
Commentary
Cyclicals 2.0: Green and Digital
The text book rules about where to invest following a recession may not apply in a post-pandemic world; more than bricks and mortar, stimulus efforts are green and digital now.
Commentary
Fed Shifting Focus From Crisis Management to Easy Financial Conditions
We expect the Federal Reserve will continue to conduct asset purchases at its current pace through year-end, and eventually commit to keeping interest rates on hold through 2022. This should help ensure easy financial conditions and support the economic recovery.
Commentary
Manager Diversification in LDI Portfolios: Consume in Moderation
Over diversifying an LDI manager roster may have important hidden costs.
Commentary
Seeking Long‑term Value in a Gradually Healing Economy
This strategy aims to help investors participate in the ongoing recovery of the global economy, offering potential for attractive yield while managing downside risks.
Commentary
Monthly Municipal Market Update, April 2020
A brief monthly update on what's happening in the municipal bond market....
Commentary
Post‑COVID Economy: Not the Way We Were
The COVID-19 crisis is likely to accelerate many underlying, secular disruptive forces already affecting economies and financial markets. This may only increase the difference between those companies, sectors, and countries that are being disrupted, and those that are acting more like disruptors. Distinguishing between the two is becoming crucial.
Commentary
Six Key Questions on U.S. Policy and the Economic Outlook
The U.S. political focus has shifted to the reopening of the economy.
Commentary
All Asset All Access: Positioning Portfolios for Opportunity in Stormy Markets
Research Affiliates discusses how the All Asset portfolios seek to capitalize on opportunities amid pandemic-related market volatility and a strengthening U.S. dollar.
Commentary
Municipal Yields Rising
Weak technicals are creating an opportunity in long-duration municipal bonds.
Commentary
Municipal Yields Rising
Weak technicals are creating an opportunity in long-duration municipal bonds.
Commentary
Looking Beyond Market Stabilization to the Future Path of Monetary Policy
Over the next several quarters, monetary conditions will likely be set not only by Fed balance sheet policies, but also by the expected path of interest rates.
Commentary
Monthly Municipal Market Update, March 2020
A brief monthly update on what's happening in the municipal bond market.
Commentary
Looking Beyond the Many Recessions
Major economies are contracting, but extraordinary policy responses could limit severe recessions to this year.
Commentary
Post‑Pandemic Interest Rates: Lower for Longer
Evidence from decades and even centuries ago, plus the unique circumstances of the current global health crisis and its economic impact, suggests we can expect a “New Neutral 2.0” of lower interest rates for longer.
Commentary
From Hurting to Healing
Our baseline economic forecast is a U-shaped global recovery, but substantial unknowns remain.
Commentary
Economic Fallout: Here Comes Congress!
The $2.2 trillion stimulus is the biggest ever, but Congress will likely be forced to do even more.
Commentary
Making Sense of the Move in Munis
Liquidity could remain challenged, but valuations may be attractive for long-term investors.
Commentary
In Europe the Crisis Policy Response Is Substantial, But More Is Likely Needed
The conditions for a relatively quick and robust rebound rest on the success in containing the virus within a reasonable horizon, and a well-calibrated economic policy response.
Commentary
The Fed: Avoiding a Depression
The Fed’s aggressive support may help keep markets functioning, hasten recovery and avoid longer-term damage.
Commentary
All Asset All Access, March 2020
Research Affiliates assesses the potential impact of COVID-19 on economies and investments, and what it means for the All Asset strategies.
Commentary
Economic Fallout: Here Comes Congress?
A bolder fiscal response to the rapidly spreading coronavirus has become an economic and political imperative.
Commentary
Policymakers: Pulling Out All The Stops
Governments and central banks have started to respond more forcefully to the health crisis, enacting policy in an effort to limit long-term damage to the global economy.
Commentary
ECB Review: Fiscal First and Foremost
The European Central Bank (ECB) didn’t follow other major central banks and refrained from cutting interest rates in response to the coronavirus outbreak. This signals a shift in the central bank’s preferred policy tools – read more.
Commentary
Fed Takes Action to Bolster Treasury Market Functioning
The Fed announced two actions Thursday in response to stress in the market for U.S. Treasuries.
Commentary
Oil Prices: Lower for Longer
As the oil surplus builds, we expect U.S. crude oil to linger at $30-$40 per barrel for the next several months.
Commentary
Fiscal and Monetary Together
The Bank of England and the British government both announced easing measures to counter the effects of the coronavirus on the economy – how effective can we expect these measures to be?
Commentary
When Rate Cuts and Quantitative Easing Fall Flat
Fed rate cuts may be less effective at boosting the economy or markets as societies grapple with the spread of COVID-19, but other policy measures may help.
Commentary
Gender Equality: Celebrating Progress and Looking Ahead
In recognition of International Women’s Day on 8 March, Cady Johnson shares her perspective on gender equality in the financial services industry.
Commentary
Fed Moves First to Counter COVID-19 Market Fears
The Federal Reserve wants to avoid a crisis of confidence.
Commentary
The Fed Has Another Lever to Pull
The Fed could give the economy a powerful boost by maintaining the mix of assets on its balance sheet.
Commentary
Investing in a Diverse Future
In recognition of International Women’s Day on 8 March, Candice Stack and David Forgash discuss the internship program PIMCO hosts in partnership with Girls Who Invest.
Commentary
What Does the Puerto Rico HTA Ruling Mean for Special Revenue Bonds? Likely Not as Much as Feared
Municipal bond investors worried by the 1st U.S. Circuit Court of Appeals’ affirmation of a lower court’s decision regarding the Puerto Rico Highway Transportation Authority should rest a bit easier: The ramifications will likely be limited.
Commentary
Asset Allocation Views: Prolonging the Expansion
Read our key takeaways from our 2020 Asset Allocation Outlook, including how we are positioning multi-asset portfolios in light of our outlooks for the global economy and markets.
Commentary
Growth, Inflation, and the Potential for Disruption
Three key themes from our latest Cyclical Outlook will likely drive the global economy and central bank policy in the year ahead.
Commentary
New Year, New Risks
A review of last month’s market-moving events across countries and asset classes.
Commentary
All Asset All Access, February 2020
Research Affiliates examines how different asset classes perform across full market cycles, and discusses how macro forecasts inform its investment strategies.
Commentary
Corporate Credit, Housing, and the Next Recession
This time, it’s the riskier segments of the corporate credit market – not housing – that could trigger the next downturn.
Commentary
March May Matter More for Investors Watching U.S. Primaries
We think investors should not extrapolate too much from who wins the early contests, including Iowa.
Commentary
Dispatch From Davos: Sustainability in Sharp Focus
How can leaders in finance embrace the Davos 2020 theme of “Stakeholders for a Cohesive and Sustainable World”? Here are our key observations.
Commentary
Fed Balance Sheet in Focus
As the Fed winds down its T-bill and repo programs, we don’t anticipate market volatility to emerge – at least not as a result of the Fed’s actions.
Commentary
Rating Events: One Theme to Follow in Global Credit Markets in 2020
Alongside pockets of weakness in credit markets come pockets of opportunity for active managers who focus on rigorous bottom-up research and careful credit selection.
Commentary
Key Geopolitical Risks to Oil in 2020
Tensions in the Middle East and North Africa have once again brought geopolitical risks to the forefront of oil markets.
Commentary
Monthly Municipal Market Update, December 2019
A brief monthly update on what's happening in the municipal bond market.
Commentary
All Asset All Access, January 2020
Research Affiliates provides its outlook for 2020 and discusses where it sees attractive return opportunities across the globe.
Commentary
Seven Macro Themes for 2020
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.
Commentary
Target Date Funds: Blend Is the Trend
DC plan sponsors are increasingly using TDFs that blend active and passive strategies to seek lower fees and enhanced alpha potential.
Commentary
Investors May Benefit as Muni Issuers Turn to Taxable Markets
Muni issuers are increasingly refinancing tax-exempt munis in the taxable market, but both areas offer potential benefits.
Commentary
Year‑End Tailwind: De‑Escalating Policy
The U.S.-China trade deal is one of three diminishing policy risks, but investors shouldn’t assume that all policy uncertainty has been eliminated.
Commentary
The End of the Beginning
While the election result reduces Brexit uncertainty significantly, it doesn’t eliminate it. Will there be an extension of the transition period? How will any deal affect the economy? In the meantime, UK banks and sterling, especially wounded since the 2016 referendum, still offer value, while low-yielding gilts look unattractive relative to other government debt, such as U.S. Treasuries.
Commentary
Monthly Municipal Market Update, November 2019
A brief monthly update on what's happening in the municipal bond market.
Commentary
Federal Reserve Appears Confident in U.S. Economy's Soft Landing
In its December forecasts, the Federal Reserve estimates that the policy rate will hold steady through 2020. Will economic and trade developments change that view?
Commentary
Changing Speeds?
A review of last month’s market-moving events across countries and asset classes.
Commentary
All Asset All Access, December 2019
Research Affiliates discusses why they believe value investing is still alive and well and explains how changes to the display of expense ratios seek to enhance clarity for investors.
Commentary
Salve for a Constrained Repo Market, or Potential Funding Destabilizer?
The recent repo squall shined a spotlight on “sponsored repo” transactions, a growing segment of the U.S. overnight funding market.
Commentary
Navigating U.S. Wealth Management: Seven Ideas for Financial Advisors and Individual Investors in 20
We aim to support wealth management firms, advisors, and investors as they assess portfolio strategy and navigate the shifting trends we face in the new year.
Commentary
Third‑Quarter Earnings Eased Market Fears, But Will the Reprieve Last?
Equity and credit markets have thus far taken lackluster earnings results and lower expectations in stride, but we think this could change if confidence readings drop further.
Commentary
Making the Most of Model Portfolios
Models can help advisors streamline portfolio management while retaining the level of discretion appropriate for their practice.
Commentary
Resilient Private Income in Late-Cycle Markets
Private markets remain a key source of income for institutional portfolios, but late-cycle concerns demand a thoughtful approach to opportunities and risks.
Commentary
Monthly Municipal Market Update, October 2019
A brief monthly update on what's happening in the municipal bond market.
Commentary
Beneath the Surface
A review of last month’s market-moving events across countries and asset classes.
Commentary
All Asset All Access, November 2019
Research Affiliates discusses how its research partnerships with academic thought leaders inform its process and examines the All Asset strategies’ returns per unit of equity beta.
Commentary
Income Fund Update: Taking a Patient Approach as Growth Slows
With global growth slowing and significant uncertainty around trade and politics, PIMCO’s Income Fund is taking the long-term view and positioning defensively.
Commentary
Spotlight on High Yield Credit Amid Declining Yields in Fixed Income Markets
The pitfalls and opportunities we see in high yield markets highlight the importance of active portfolio management, rigorous credit analysis, and taking a cautious and selective approach.
Commentary
Institutional Investors May Benefit From More Complex High Yield Muni Market
Rising issuance of munis available only to qualified institutional buyers (QIBs) may offer higher yields to investors who can access them.
Commentary
After Three Cuts in a Row, Is the Fed Done Easing?
Fed Chair Powell signaled that another “insurance” rate cut is unlikely. Instead, further rate cuts are contingent on a more material deterioration in the economic outlook.
Commentary
U.K. Elections: What’s Next for Economy and Markets?
The U.K. is set to head to the polls on December 12. Here are our key takeaways for the economy and markets.
Commentary
Financial Advisors and Retirement: The Decumulation Dilemma
Our Income to Outcome framework seeks to deliver a simpler, more intuitive approach to investing for retirement.
Commentary
Are Investors Being ‘Aggressively Passive’ in Bond ETFs?
For bond allocations, think twice before reflexively allocating to index ETFs.
Commentary
China CPI Breaks 3% PBOC Target: What Does It Mean for Policy?
Headline inflation resulting from a food price shock can never be ignored fully.
Commentary
Germany: Back to “Sick Man of Europe”?
Germany’s economy is on the brink of recession. We expect a gradual recovery through the next year, but this is dependent on easing trade tensions.
Commentary
Could the Fed Pivot on Balance Sheet Policy for Mortgage Securities?
The Fed has another lever to pull to ease monetary policy, one that could increase savings rates and create more disposable income.
Commentary
U.S.−China Trade Deal: A Temporary Reprieve
Without pouring water on the “love fest,” we contend that the deal struck between China and the U.S. leaves much to be desired.
Commentary
Monthly Municipal Market Update, September 2019
A brief monthly update on what's happening in the municipal bond market.
Commentary
A Tale of Two Halves
A review of last month’s market-moving events across countries and asset classes.
Commentary
All Asset All Access, October 2019
In this issue, Research Affiliates discusses why its contrarian philosophy may add value over the long term and how the growing likelihood of a global economic slowdown is affecting positioning.
Commentary
Impeachment Could Be Both Bad News and Good News for Trade Policy
We believe the impeachment inquiry could have an adverse impact on the ongoing U.S.–China trade conflict, but there may be a silver lining for NAFTA 2.0.
Commentary
U.S. Equities: Calm on the Surface, Turbulent Within
In the past few weeks, U.S. equity momentum and value factors have had their sharpest moves in more than 15 years based on our calculations.
Commentary
UN Climate Summit: Business and Investors Lead on Action
Businesses and investors are moving ahead with progressive actions despite policy vacuums.
Commentary
Steering Away From Volatile Markets: Short-Term Bonds May Offer Value As Fed Eases
Short-term bonds could rise in price and potentially maintain a high degree of liquidity in response to Federal Reserve rate cuts.
Commentary
Window of Weakness
In a nutshell, we concluded that the global economy is about to enter a low-growth “window of weakness,” which we expect to persist going into 2020 with heightened uncertainty about whether it is a window to recovery or recession.
Commentary
September Fed Meeting: Divisions Over the Path of Policy
Weakness in the U.S. economy leaves it vulnerable to shocks. We think the Fed will respond with additional easing this year.
Commentary
Repo Rate Spike: A ‘Tail’ Of Low Liquidity
Markets can prove interesting when the price of liquidity abruptly increases and high yield is no longer the highest-yielding investment.
Commentary
Three ESG Takeaways from PRI in Person 2019
This year, in Paris, we were excited to participate as an industry expert and to engage with attendees on ESG (environmental, social, and governance) investing in fixed income.
Commentary
Saudi Oil Site Attacks Exacerbate Tightening Supply, Add to Price Risk Premium
Attacks and outages could add to the longer-term geopolitical risk premium in oil prices.
Commentary
European Central Bank Policy: QE Infinity
That fiscal policy is becoming the new monetary policy when it comes to fighting recession was a key conclusion of PIMCO’s Secular Forum, and this was the message ECB President Mario Draghi underlined through both actions and words.
Commentary
Oil Supply Outlook: Is Your Barrel Half Full or Half Empty?
Continued tight crude balances could be the bigger surprise to the market.
Commentary
Maximizing U.S. Treasury Allocations to Hedge Equity Risk
Equity-risk mitigation may be improved by combining positive expected return strategies that are negatively correlated with equities.
Commentary
Disruption in the Eurozone: Challenges of an Arranged Marriage
Two decades after inception, the eurozone countries’ arranged marriage-type of union looks shaky at best, and now it is even more challenged by ongoing, global disruptive forces.
Commentary
Income Fund Update: Positioning for the Long Term
Events of the last several weeks have not changed our long-term outlook, but we have become a bit more cautious in the short term.
Commentary
Credit Versus Equities: Idiosyncratic Stories Call For a Thoughtful Approach
While slower earnings growth is a broad headwind for both corporate debt and equities, it also tends to increase performance dispersion.
Commentary
Asset Allocation Views: Easing Into Slowing Growth
Read our key takeaways from our 2019 Asset Allocation Midyear Update, including how we are positioning multi-asset portfolios in light of our outlooks for the global economy and markets.
Commentary
Global Fetters: Insights From Jackson Hole
The institutional “golden fetters” of the interwar period have been replaced by fundamental “global fetters” that severely constrain monetary policy.
Commentary
Muni Midyear Outlook 2019: Three Key Takeaways
We see several areas of opportunity for muni investors in the second half of 2019.
Commentary
ECB Signals Easing, But What’s Left in the Policy Arsenal?
Come the fall, the ECB will likely deliver yet another easing package that could effectively deplete its monetary policy toolbox.
Commentary
Summer of Discontent: Market Volatility Underscores Fragility of Aging Expansion
The last few days have highlighted the inherent fragility in markets – and the growth outlook globally.
Commentary
Interest Rates: Naturally Negative?
It is no longer absurd to think that the nominal yield on U.S. Treasury securities could go negative.
Commentary
Trade Tension Flare‑Up: Not So Surprising
We think investors should take President Donald Trump at his word that he will move forward with the next round of tariffs on China come September.
Commentary
The Fed’s Rate Cut: Growth ‘Insurance’
We find the Fed’s statement clear, and we expect another rate cut as soon as September with possible additional cuts thereafter.
Commentary
U.S. Dollar Policy: Through the Looking Glass of U.S. Currency Intervention
The market consequences of direct intervention by the U.S. could be substantial and thus bear consideration.
Commentary
Signs of Stress in U.S. Economy Bolster Expectations for Fed Rate Cut
The Federal Reserve is poised to cut interest rates at its July meeting. But how much will it cut?
Commentary
Core CPI Inflation Beats Expectations, in Awkward Timing for the Fed
June inflation may have been boosted by the recent increase in import tariffs, while inflationary pressures from rising wages and tight labor markets remain notably subdued.
Commentary
Dealing With Disruption
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.
Commentary
June Fed Meeting Dovish Signals Uncertainty Ahead
The tone of the FOMC statement and press conference was a notable shift from the May meeting, given uncertainty around the economic outlook.
Commentary
Oil Sell‑Off Sparks Investment Opportunities
Demand concerns, trade tensions, and strongly implied U.S. production are driving an oil sell-off, much like in fourth-quarter 2018, but the complicated backdrop may create investment opportunities.
Commentary
Interest Rate Outlook: Fed Evaluating Risks to U.S. Economy
We don’t expect a Fed rate cut in June, but if downside risks to the economy escalate, a 50 basis point cut in July is possible, in our view.
Commentary
New U.S. – Mexico Tariffs Would Add to Economic Costs
New U.S. tariffs on Mexico would add to the direct economic costs of the string of tariff hikes enacted during this administration.
Commentary
Falling Angels? Credit Market Risks and Opportunities
We believe the spotlight on the burgeoning BBB credit market has diverted attention from the risks in the smaller single-A market.
Commentary
Falling Angels? Credit Market Risks and Opportunities
We believe the spotlight on the burgeoning BBB credit market has diverted attention from the risks in the smaller single-A market.
Commentary
Rationality and Retirement: Mutually Exclusive?
Behavioral finance may help to overcome cognitive biases.
Commentary
U.S. Housing: Potential Opportunity Amid Cautious Economic Outlook
Even as the probability of a recession in the near-term remains low, we believe investors should look to sectors that are likely to be resilient in periods of higher volatility.
Commentary
Three Key Takeaways From PIMCO’s Cyclical Outlook: Flatlining at The New Neutral
Following the Federal Reserve’s pivot to patience, we believe U.S. short-term interest rates are now anchored in The New Neutral. Global growth keeps synching lower, but may experience a soft landing later this year if China’s economy stabilizes and trade tensions ease.
Commentary
Emerging Markets Outlook: The Wealth of Nations
While we are constructive on the prospects for emerging markets in the year ahead, we think the real potential lies in individual country and thematic opportunities.
Commentary
Navigating Uncertainty in Inflation Markets: The UK Case
Investors in UK inflation-linked bonds are facing two critical sources of structural uncertainty: Brexit-induced volatility and questions about the deeply entrenched (yet problematic) Retail Price Index (RPI
Commentary
Flatlining at The New Neutral
We believe short-term interest rates in the U.S. are now anchored in The New Neutral, as global growth keeps synching lower.
Commentary
Munis and the Markets, February 2019
A brief monthly update on what's happening in the municipal bond market.
Commentary
Moral Hazard in Emerging Markets: Papering Over the Cracks
With a patchwork of lenders now willing to provide financing on noncommercial terms to countries in distress, “moral hazard plays” have proliferated in emerging markets.
Commentary
Navigating Uncertainty in Inflation Markets: The UK Case
Investors in UK inflation-linked bonds are facing two critical sources of structural uncertainty: volatility arising from the Brexit process, and questions about the deeply entrenched (yet problematic) Retail Price Index (RPI), to which UK “linkers” are tied.
Commentary
The Style Cycle: Equity Factors and Macro Data Diverge
The divergence between recent bullish factor performance and weaker economic fundamenta...
Commentary
Balancing Act: Maintaining Liquidity and Purchasing Power with Short‑Term Bonds
Investors globally are walking a tightrope today, balancing risk-taking and risk management. As growth appears poised to slow, the outlook for financial markets remains uncertain − a situation compounded by increased cost of capital, tighter financial conditions and heightened market volatility.
Commentary
Asian Credit: High Yield Anticipated to Offer Attractive Opportunities in 2019
We favor Asian high yield over investment grade credits in spite of historical higher volatility since we view valuations as more attractive, particularly compared with U.S. high yield and emerging market peers.
Commentary
All Asset All Access, March 2019
In this issue, Research Affiliates assesses risks facing the All Asset strategies and shares insights from its CEO on fostering a winning corporate culture.
Commentary
Emerging Market Equities: Looking Beyond Near‑Term Fear
Over the past year, emerging market (EM) equities have been one of the most volatile segments of the global market. With news headlines dominated by the International Monetary Fund’s bailout of Argentina and Turkey’s sudden interest rate increase and currency depreciation, EM equities dramatically sold off in 2018 – down 14.6% for the year.
Commentary
International Women’s Day 2019: Global Perspectives on Women in Finance
In recognition of International Women’s Day on 8 March, PIMCO leaders in three regions discuss their career experiences and the progress they see for women in finance and their own career experiences.
Commentary
International Women’s Day 2019: What It Means for Investment Management
The landscape for women in finance has changed notably over the past two decades. Today, women represent 46% of financial services employees, according to a study by Mercer. This growth, however, has been predominantly at the junior level; women represent only 15% of the top ranks in finance, and the number falls even further at the CEO level...
Commentary
Equities vs. Bonds? Look to China for Clues
Chinese stimulus could be instrumental in deciding which investors are proved right.
Commentary
Defensive Versus Cyclical: The Blurring Lines
Bond investors will need to be very selective due to recent changes in sector credit quality.
Commentary
Equities vs. Bonds? Look to China for Clues
Chinese stimulus could be instrumental in deciding which investors are proved right....
Commentary
Impact Investing: Imagining the Next Evolution in Economies and Finance
Impact investing is anchored in a fundamental belief that over the long term, healthy societies and healthy markets go hand-in-hand.
Commentary
Munis and the Markets, January 2019
A brief monthly update on what's happening in the municipal bond market.
Commentary
Core CPI May Tick Up Before Moderating in the Second Half
The decline in oil prices continues to weigh on headline Consumer Price Index (CPI) inflation, which fell 0.3 percentage point to 1.6% year-over-year in January. However, core CPI (which excludes energy and food prices) held steady at 2.2% year-over-year, with support from normalization in retail prices after holiday discounting late last year.
Commentary
EU Elections: Populism’s Threat May Be Overstated
The European parliamentary elections may cause near-term market jitters, but we do not think the outcome will be a game-changer.
Commentary
Good Things Come to Those Who Are Patient
A review of last month’s market-moving events across countries and asset classes.
Commentary
All Asset All Access, February 2019
In this issue, Research Affiliates assesses the potential impact of a bear market in U.S. stocks on emerging markets and discusses regulatory reporting requirements.
Commentary
How Durable Is the Fed’s Dovish Turn?
The Federal Reserve’s recently communicated change in its outlook for monetary policy has led to concerns that the Fed is overreacting to market volatility, or worse, succumbing to political pressures. However, we believe there is a more compelling reason for the dovish shift.
Commentary
Multi‑Strategy Alternative Funds: Not All Are Created Equal
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.
Commentary
Dispatch from Davos: Retooling Globalization
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.
Commentary
What Can Marshmallows Teach Us About Social Security Deferral?
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.
Commentary
With Canada’s Economy in Transition, the Neutral Rate is Key in 2019
We are skeptical Canada can shift its growth model, and our investment outlook for Canada is cautious as a result.
Commentary
The Fed: Patient Amid Rising Uncertainty
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.
Commentary
China’s Growth Playbook: How to Get Out of a Fix
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.
Commentary
Income Fund Update: Building Resiliency in Volatile Markets
We expect market volatility to continue in 2019, creating opportunities for the Income Fund.
Commentary
Delaying the ECB’s Liftoff
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.
Commentary
The Economic Cost of the U.S. Shutdown Showdown
While we believe the shutdown on its own would have only a modest impact on growth, the...
Commentary
Asia Market Outlook 2019: Recovery, Rebalancing and Rotation
We are focused on identifying country-specific opportunities and carefully selecting credit positions where we see value and very low default risk.
Commentary
Agency MBS: Time to Rethink Prepayments
In our view, a combination of positive macroeconomic factors is likely to keep prepayment speeds higher than the market projects.
Commentary
U.S. Policy Outlook for 2019: Trade Risks Continue, But Might Not Escalate
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.
Commentary
The Fed: Poised to Pause in March
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.
Commentary
Investing in Decisions
Richard Thaler and Emmanuel Roman discuss behavioral science and investing.
Commentary
Five Key Takeaways from PIMCO’s Cyclical Outlook: Synching Lower
Five key macro debates are likely to shape the economic and market outlook for 2019.
Commentary
Truce Be Told
-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.
Commentary
Munis and the Markets, November 2018
A brief monthly update on what's happening in the municipal bond market.
Commentary
Brexit: In All the Noise, Has That Much Changed?
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.
Commentary
High Yield and Bank Loans: A Tale of Two Markets
Recent fundamental changes in the leveraged finance markets mean that actively managing credit exposure is more important than ever.
Commentary
Longer‑Term Risks Complicate ECB's Policy Path: Beware the Pillars of Hercules
Will the ECB have sufficient firepower – and support from the population – to spur the economy when the next recession arrives?
Commentary
Synching Lower
We see a synchronized global slowdown in 2019. We position cautiously but anticipate opportunities ahead.
Commentary
Corporate Reporting on the SDGs: Mapping a Sustainable Future
PIMCO has mapped the SDG sustainability reporting of 246 companies globally with the goal of encouraging enhanced disclosure.
Commentary
What OPEC’s ‘Third Way’ Means for Investors
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.
Commentary
All Asset All Access, December 2018
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.
Commentary
Emerging Markets: Vulnerable to External Factors?
The combination of trade tensions, U.S. rate hikes and weaker global trade growth has weighed on emerging markets (EM) this year.
Commentary
Engineering Inflation: For the Fed, the Time Is Now
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.
Commentary
Powell’s Speech Lifted Markets, But We Expect Gradual Rate Hikes to Continue
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.
Commentary
Preparing Portfolios for Resilience Against Inflation Surprises
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.
Commentary
Mexico: ‘Tequila’ Sunrise?
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.
Commentary
Asset Allocation: Following the Cash to Find Quality in Equities
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.
Commentary
Packing for the Holidays: Reducing Risk with Short‑Term Bonds
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.
Commentary
Core CPI Rebounds on Used Car Bump, While Tariffs’ Impact Is Mixed
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.
Commentary
Into the Red Zone
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.
Commentary
Credit Markets: To BBB or Not to BBB?
Financial media and investors have been focusing on the BBB segment of the U.S. investment grade (IG) corporate bond market this year.
Commentary
How Markets May React to a Brexit Deal
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.
Commentary
An Innovative Approach to Enhancing Small Cap Allocations
Index returns and traditional active management may fall short, so PIMCO StocksPLUS Small takes a different path to seek small cap alpha.
Commentary
China: Current Account Deficit Will Pressure the Yuan and Refashion Global Portfolio Flows
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.
Commentary
Key Takeaways From the U.S. Midterms: What a Split Congress Means for Markets
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.
Commentary
Emerging Markets: Diversification and Yield Potential for Insurance Companies
This may be an opportune time for insurance companies to consider high-grade emerging markets.
Commentary
Slower Eurozone Growth in Q3 Not a Major Concern, But Watch Italy
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.
Commentary
Volatility Brings Opportunity in Bank Capital Securities
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.
Commentary
U.S. Midterm Election Preview: Policy Gridlock Ahead
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?
Commentary
A New Dawn for Brazil?
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.
Commentary
Investing Ideas for an Aging Expansion: Three Reasons to Look at Munis
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.
Commentary
An Improving Environment for Capital‑Efficient Equity Investing
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.
Commentary
Key Takeaways From PIMCO’s Cyclical Outlook: Growing, But Slowing
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.
Commentary
Navigating U.S. Wealth Management: How Advisors Are Using Alternatives in Client Portfolios
Alternatives allocations are becoming more mainstream in wealth management portfolios, though implementation varies greatly among financial advisors.
Commentary
Collapsing Oil Prices, Not Trade, Pose Biggest Exogenous Risk to Canada’s Economy
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.
Commentary
PIMCO’s Rigorous Approach to Managing Portfolio Liquidity Risk
By managing liquidity risk, we help ensure that portfolios are well-positioned both to withstand stress scenarios and to potentially take advantage of market dislocations.
Commentary
Health Check for Your Asset Allocation: Focus on Quality and Flexibility
In PIMCO’s recent Cyclical Outlook, our colleagues Joachim Fels and Andrew Balls outlined a “growing but slowing” backdrop, with the global economy in the final stages of an economic cycle. This late-cycle phase poses significant challenges to asset allocators.
Commentary
Ten Investor Takeaways From the 2018 Annual IMF/World Bank Meetings
Global central bankers, finance ministers and representatives from the private sector and civic groups gathered in Bali recently for the annual meetings of the IMF (International Monetary Fund)/World Bank Group. Below are 10 key takeaways from the discussions.
Commentary
Rising Rates: Not So Fast
Worries about rising U.S. interest rates have gripped global financial markets in recent weeks, with investors questioning whether the era of historically low global interest rates will persist.
Commentary
Argentina and the IMF: Second Time's a Charm
Like shock therapy, Argentina’s new lending agreement with the IMF delivers immediate benefits: increased funding and front-loaded disbursements to meet the country’s budget through next year. It also comes with serious side effects, including a likely deep recession in Argentina and the risk of political resistance leading up to the country’s elections in 2019.
Commentary
Oil Hits Multiyear Highs on Renewed Iran Sanctions: What Investors Should Watch
While we believe investors can expect a hawkish policy stance to keep supporting prices...
Commentary
What Investors Should Watch as Brexit Talks Heat Up
As we enter another period of accelerated Brexit negotiations, how can investors best navigate the next few weeks and months? Our assessment is that a number of U.K. assets have already priced in a significant chance of a disruptive Brexit, but there is scope for further moves in either direction, depending on the path the negotiations take.
Commentary
Fearing the Next Recession? Investing at the Front End of the Bond Market
Now in its 10th year, the U.S. economic expansion could become the longest on record: Our forecast calls for the current “late-cycle” phase of the expansion to last at least another year, barring any policy mistakes.
Commentary
Commodities: Expectations for Chinese Stimulus May Provide Support
Investors expecting that trade tensions with Washington will soon prompt additional stimulus by Beijing may be disappointed. Concerns over government debt, we believe, will limit additional stimulus – unless trade tensions weaken growth dramatically.
Commentary
Growing, But Slowing
We see growth slowing, but not an imminent recession. We invest accordingly.
Commentary
The Fed: Look Forward or Risk a Hawkish Mistake
Will the Federal Reserve take a hawkish turn at its next meeting ending on 26 September? There are signs it may. Although we expect the Fed to hike rates by 25 basis points, to 2.0% to 2.25%, that’s not our concern.
Commentary
All Asset All Access, September 2018
In this issue, Research Affiliates discusses the funds’ long-term outcomes relative to peers, views on emerging market currencies and recent research centered on momentum.
Commentary
Love ’EM or Leave ’EM?
A review of last month’s market-moving events across countries and asset classes.
Commentary
Next Recession Ahead? Fixed Income Investing Ideas in an Aging Expansion
We look at ways to de-risk, diversify and differentiate ahead of a turn in the economic cycle.
Commentary
Retail Dip Weighs on U.S. Core CPI Inflation
U.S. core Consumer Price Index (CPI) inflation lagged expectations in August, breaking from the recent trend of generally upward surprises from various wage and price reports.
Commentary
SDG Bonds: Creating a World of Opportunity for Issuers and Investors
The UN Sustainable Development Goals provide the investment community, including bond issuers, with a framework for tackling long-term global challenges.
Commentary
Asset Allocation Views: Late-Cycle Investing
Risk is rising late in the cycle. How should investors respond?
Commentary
Shifting Realities and Opportunities in Emerging Markets
One truism spanning the last three decades has been that emerging markets are a leveraged play on global growth – often outperforming when developed markets (DM) are growing but susceptible to sharp downturns when DM conditions are less favorable.
Commentary
The Art of Monetary Policy
Art may now be making a comeback in monetary policy, and partly at the expense of science.
Commentary
Women’s Economic Power Is Expanding – Is Investment Management Keeping Pace?
Women are transforming the global economy. The financial services industry must evolve both to better serve women investors, and to assess the impact that women’s decisions have on markets worldwide – now and in the decades to come.
Commentary
So Long, Libor: Transition Is Underway to SOFR and Other Alternative Reference Rates
It won’t be easy and key risks remain, but we believe the players and strategies are now in place to transition markets beyond Libor.
Commentary
Powell and the Fed Face ‘Dollar Doom Loop’ Dilemma
The U.S. central bank is damned either way as it faces a choice on a September rate rise.
Commentary
Investing in China: Evolving Opportunities
We expect an acceleration of strategic investments into onshore China bonds as these securities join emerging market and global bond indexes.
Commentary
The Uncertainty Principle: Fed Weighing Policy Risks
Federal Reserve Chairman Jerome Powell’s remarks at the annual Jackson Hole Symposium emphasized several important uncertainties about the structural aspects in the U.S. economy that greatly complicate the central bankers’ medium-term job of setting monetary policy.
Commentary
Why Commodity Carry May Be Higher Than You Think
In commodity investing, roll yield and carry are not the same thing.
Commentary
Updating Cash and Short‑Term Portfolios: Why Replay That CD?
Looking through your old compact disc collection can be nostalgic. The cover photo on your favorite CD or a few bars of a summer song can transport you back in time to what seems like a better, simpler place.
Commentary
Income Fund Portfolio Managers Discuss Rising Rates and the Impact on Bond Investors
We believe the Income Fund has the tools to be resilient in the face of rising interest rates.
Commentary
REITs Revisited: A Closer Look at Tax Efficiency and Returns
A fresh look at after-tax returns and valuations may cast REITs in a new light.
Commentary
Productivity Awakening: It Takes Two to Tango
For microeconomic advances to unleash a productivity rebound economywide, the macroeconomics must cooperate.
Commentary
United Nations: Creating a New Hub for Sustainable Investment Deals
The UN recently wrapped up its annual High-Level Political Forum on Sustainable Development, which brings together the 193 Member States to explore how they plan to reach the UN’s Sustainable Development Goals (SDGs).
Commentary
Munis in Focus: Preparing for Late-Cycle Certainties
Munis may offer U.S. taxpayers key benefits as they contemplate the end of the economic expansion.
Commentary
De-FANGed Trade?
A review of last month’s market-moving events across countries and asset classes.
Commentary
The Global Bond Paradox: How Hedging Can Enhance Low Local Yields
Japanese government bonds yield virtually zero. Yields on German bunds remain stuck below 50 basis points (bps). U.K. gilts yield only about 125 bps. Do non-U.S. bonds such as these hold any value to dollar-based investors?
Commentary
U.S. Core Inflation Increases Due to Metals Costs, Tariffs
U.S. consumer prices rose more than expected in July, reinforcing our view that the Fed will continue its gradual pace of interest rate hikes, at least for now.
Commentary
ESG Integration and Engagement: South Africa Sovereign Credit
Environmental, social and governance (ESG) indicators are integral to PIMCO’s sovereign credit assessments, which inform our investment decisions. But how exactly do we incorporate ESG considerations into our decisions?
Commentary
Income Strategy Update: Sifting Global Change for Investment Opportunities
Portfolio managers Dan Ivascyn and Alfred Murata discuss the impact of higher market volatility and how they are positioning the Income Strategy for change ahead.
Commentary
All Asset All Access, August 2018
In this issue, Research Affiliates discusses positioning in emerging markets and why investors should care about the distinction between real and nominal returns.
Commentary
Could Trade Turmoil Be an Economic Spoiler for the U.S.?
Even before President Trump’s inauguration, we at PIMCO had identified trade policy as a potential spoiler to the otherwise pro-growth nature of the president’s economic agenda. And the unfolding of this “summer of discontent” has only affirmed our view heading into 2018 that trade policy remains one of the biggest policy risks for markets and the economy this year.
Commentary
Fed Meeting: Important Details to Come?
The Federal Reserve held interest rates steady and released a statement on 1 August that made only minor changes to reflect the more upbeat U.S. economy since the Fed’s June meeting. Despite the lack of surprises, however, we don’t think investors should write off the meeting just yet: The more interesting aspect may well come later ‒ when the meeting minutes are revealed in a few weeks.
Commentary
Gold Outlook Brightens
Ultimately, we think the sell-off will prove transient and that the relationship of real yields to gold observed over the past decade will prevail.
Commentary
Fed Up With the Fed: What It Means for the U.S. Dollar
President Donald Trump has opened a new front in the cold currency war: He recently complained in an interview and on Twitter that the strong U.S. dollar puts the U.S. at a disadvantage and that China and the European Union have been manipulating their currencies and interest rates lower.
Commentary
U.K. Outlook: It’s Not Just Brexit
We see key factors beyond Brexit affecting the medium-term economic outlook for the U.K.
Commentary
FERC Change in Stance Is Positive for Oil and Gas MLPs
Master limited partnership (MLP) investors received some good news last week. The Federal Energy Regulatory Commission (FERC) issued a final ruling that clarifies and softens a previous order issued in March, which would have disallowed a long-standing policy enabling MLPs to earn an income tax allowance in their pipeline rates.
Commentary
Will the Fed Yield to the Yield Curve?
Will they or won’t they? With the U.S. yield curve flattening to new cycle lows, whether or not the Federal Reserve will stick to its planned rate-hike path is a key question – and could soon become the key question – for financial markets.
Commentary
Yuan Decline: Concerning But Not Systemic
Amid fears of escalating trade tensions, the yuan’s sharp depreciation against the dollar last month has spooked some investors who see similarities with China’s currency devaluation in 2015, an episode that prompted capital outflows and roiled markets worldwide.
Commentary
When Push Comes to Shove
A review of last month’s market-moving events across countries and asset classes.
Commentary
Munis and the Markets, June 2018
A brief monthly update on what's happening in the municipal bond market.
Commentary
Eurozone Outlook: When Secular Turns Cyclical
Over the next few years, financial markets could be set for a series of “Rude Awakenings,” as we forecasted in our latest Secular Outlook. The global economy is transitioning out of a post-crisis period characterized by remarkable stability, and the changes ahead could be jarring for investors.
Commentary
U.S. Trade Tariffs: Impact on Asian Technology and Consumer Credit
U.S. tariffs and trade tensions have dominated headlines over the past few months. With certain tariffs aimed squarely at China, Beijing quickly responded with tariffs of its own on U.S. goods in early July. What do the tariffs mean for investors in Chinese and other Asian technology and consumer credits?
Commentary
All Asset All Access, July 2018
In this issue, Research Affiliates discusses positioning for a potential inflation shock and offers insight into its collaboration with PIMCO to bring forth innovative solutions for investors.
Commentary
Why Long-Term Investors Shouldn’t Necessarily Fear Rising Rates
Investors may be concerned that Fed rate hikes may be bad for bondholders but it’s important to remember the fundamental benefits that bonds may bring to a portfolio no matter which way rates move – capital preservation and appreciation, income, and diversification.
Commentary
ESG Investing and Fixed Income: The Next New Normal?
We believe the bond market is uniquely suited to both benefit from and provide finance for ESG-related (environmental, social and governance) efforts.
Commentary
After OPEC Meetings, We See a Constructive Backdrop for Oil
The recent OPEC meetings and press conference have given oil investors greater clarity about the cartel’s intentions and reaction function: OPEC, along with Russia and other partners, agreed to boost aggregate output by 700,000–1 million barrels per day.
Commentary
Canada’s ‘Rudest Awakening’ May Come From Debt‑Saddled Consumers
External pressures are mounting, but Canada’s biggest wake-up call may come from within.
Commentary
High Yield Bonds: A Fresh Look at BB Rated Credit
With the economy in the later stages of its post-crisis recovery, we believe investors should be cautious and selective on corporate credit. Within the high yield sector, this caution may warrant a move up in quality toward the higher end of the spectrum: BB rated bonds.
Commentary
The Currency Sweepstakes: Will the U.S. Dollar Win?
Forecasting currency performance is like predicting the outcome of a horse race. Currencies move up the field and then fall back depending on their respective country conditions. And once in a great while, a very strong contender dominates the field – much like the winner of the Triple Crown.
Commentary
Charting Unusual Late-Cycle Fiscal Stimulus in the U.S.
How can investors navigate volatility arising from late-cycle fiscal stimulus?
Commentary
Evolutions in Growth, Trade and Geopolitics
PIMCO’s Global Advisory Board discusses the outlook for major economies and geopolitical developments.
Commentary
The Fed Raises Rates as Expected but the Path of Future Hikes Grows More Uncertain
The Federal Reserve’s decision today to hike its policy rate by 25 basis points (bps) to a range of 1.75% to 2.0% was widely expected. The Federal Open Market Committee (FOMC) also signaled growing consensus that the robust pace of economic activity warrants two more rate hikes this year, for a total of four in 2018.
Commentary
Productivity Awakening?
One of the potential rude awakenings that we advised investors to prepare for in our recent Secular Outlook is a surprising surge of productivity growth over the next several years.
Commentary
China’s Property Market: Bubble or Balloon?
Despite long-running international concerns about China’s property “bubble,” the market has proven quite resilient. The Chinese government has instituted various austerity measures to cool the market, but buoyant demand for property has helped avoid any serious downturn.
Commentary
The Summer of Discontent on Trade? Deadlines, Headlines and Escalation Catalysts
Consistent with our thinking back in January 2018, trade has dominated the policy agenda in Washington and cast a pall over certain segments of the market. We continue to maintain that President Trump should be taken at his word regarding trade policy...
Commentary
International Equities and the U.S. Dollar: Is It Time to Hedge?
In a reversal from last year, the U.S. dollar has strengthened against other major currencies in 2018, reflecting rising U.S. rates, expectations of more Federal Reserve rate hikes and recent sluggish economic data outside the U.S.
Commentary
Preferred and Capital Securities Fund: Bank Fundamentals Haven’t Been This Strong in Decades
A segment of the credit market many investors may overlook, preferred securities are one of PIMCO’s highest-conviction credit views today.
Commentary
Rude Awakenings
We expect a more difficult market environment will surprise many investors as the post-crisis era ends. It’s time to position for the opportunities ahead.
Commentary
Income Strategy Update: Investing Into Higher Bond Yields
For income investors, rising interest rates have created both a challenging market environment and a better outlook for yield.
Commentary
Value in Short Bonds: ‘We’re Not in Kansas Anymore’
For years after the financial crisis, many investors were resigned to earning next to nothing on their cash and short duration investments. Rising interest rates, however, have brought a new reality: The front end of the fixed income market looks attractive for the first time in almost a decade.
Commentary
A Strong Defense Can Win Championships: Actively Managing Your Cash and Short‑Term Investments
We are positioning our ultra-short and short-term bond portfolios with the goal of not only navigating rising rates but also ultimately benefiting from them.
Commentary
UN Sustainable Development Goals: Measuring Performance Through Impact
We believe that active engagement with issuers can help reduce credit risk, unlock value for investors, and influence positive impact on economies, societies and the environment.
Commentary
Market Relieved by Inflation Reading, for Now
U.S. core Consumer Price Index (CPI) inflation was softer than consensus expectations in April, and the year-over-year rate remained stable at 2.1%. We see a couple of reasons for that, and continue to expect core CPI inflation to accelerate further (to 2.3%–2.4%) before settling back to 2.2% by year-end.
Commentary
Oil Prices Likely to Rise With U.S. Withdrawal From Iran Nuclear Deal
The U.S. decision to pull out of the Iran nuclear deal has potentially profound implications for the oil market. While withdrawal from the Joint Comprehensive Plan of Action (JCPOA) creates many known unknowns, any reduction in Iranian supply will likely exacerbate market deficits, suggesting upward pressure on pricing.
Commentary
Across the Line
A review of last month’s market-moving events across countries and asset classes.
Commentary
Why We Favor Active Management in Emerging Market Bonds
We believe the myriad inefficiencies in emerging market fixed income play to the strengths of active management.
Commentary
The U.S. Economy Isn’t Immune to Rising Oil Prices
How sensitive is the U.S. economy to rising oil prices? A popular view is that growing U.S. energy output has largely immunized the economy against the adverse effects of pricier oil.
Commentary
Fed Poised to Let Inflation Accelerate, a Little
With little in the recent economic data to warrant a change in the U.S. outlook and bond markets that were largely aligned with the Federal Reserve’s 2018 rate hike projections, today’s statement from the FOMC (Federal Open Market Committee) needed only to reaffirm the messages conveyed at the March meeting.
Commentary
Much Ado About … 3%
The 10-year U.S. Treasury yield broke 3% on 24 April to much fanfare. Stock markets tumbled, and with the media blitz that followed, many investors may have started to see “3%” in their dreams.
Commentary
Ten Investor Takeaways From the IMF/World Bank Spring Meetings
Global central bankers, finance ministers and representatives from the private sector and civic groups gathered in Washington recently for the spring meetings of the IMF (International Monetary Fund)/World Bank Group. With trade policy, geopolitics and emerging markets currently top-of-mind for many investors, the meetings were especially relevant this year.
Commentary
Global Debt and The New Neutral
We believe The New Neutral of lower-for-longer equilibrium policy rates remains a valid anchor over the medium term. The key drivers of low equilibrium rates – including demographic trends and the high level of leverage in the global economy – have not substantially changed since the financial crisis.
Commentary
China’s Surprise Reserve Requirement Cut: Liquidity Fine‑Tuning or Policy Shift?
When the People’s Bank of China (PBOC) cut its reserve requirement rate (RRR) by 1% for China’s banks recently, the central bank said its “prudent and neutral policy stance” remained in place, since the overall quantity of excess reserves would not change much. Indeed, the PBOC will maintain a relatively high reserve requirement for China’s banks.
Commentary
Bank of England: Is History Repeating Itself?
The Bank of England has had to navigate a difficult set of circumstances in its attempts to raise interest rates. As far back as 2014, Governor Mark Carney suggested that rate rises could come “sooner than markets currently expect,” only for those aspirations to be dashed. Indeed, the next move in interest rates turned out to be a rate cut, in the aftermath of the June 2016 Brexit vote.
Commentary
Managing Volatility in Short‑term Markets: The Global Liquidity Ladder
In a storm, you want to be able to reach higher ground. Recent market volatility – sparked by concerns over interest rates, inflation, global trade, the tech sector and more – has many investors shifting toward more defensive portfolio positions.
Commentary
Time for Investors to Prepare for the Next Cycle
The global economic expansion has already entered its 10th year. With bumpy and brittle growth having given way to a robust and globally synchronized conjuncture, an aging cycle has suddenly become much more cyclical.
Commentary
With Inflation Rising, Commodities May Shine
Many investors who thought worrying about inflation was “so 20th century” may now be seeing reasons to reconsider: The business cycle in the U.S. is mature, output gaps have closed, trade frictions are mounting and populism is on the rise.
Commentary
U.S. CPI Inflation: Two Trends to Watch
The acceleration in U.S. core Consumer Price Index (CPI) inflation in March was in line with expectations, and likely a welcome development for Federal Reserve officials after a surprising string of soft inflation prints last year.
Commentary
Fed Minutes: Policymakers Shrug at Market Volatility, Stay Focused on Gradual Path
The minutes of the March 2018 Federal Open Market Committee (FOMC) meeting affirmed our outlook that the Fed will likely continue to gradually and methodically increase interest rates and that the bar is relatively high for policymakers to change the current plan for two or three more hikes in 2018.
Commentary
Trade Outlook: Stormy
A review of last month’s market-moving events across countries and asset classes.
Commentary
Trade Tensions Mount: What It Means for Growth
Consistent with our view last month that the Trump administration’s more significant (and market-moving) trade actions had yet to come, the recent announcement of tariffs on Chinese products related to the Section 301 intellectual property investigation has roiled markets and increased uncertainty over the possibility of a trade war.
Commentary
State‑Specific Municipal Portfolios: When Do the Benefits Outweigh the Costs?
Recent tax reform has increased the dialogue around state preference municipal portfolios, and some municipal investors are inquiring whether state-specific or state preference portfolios are a good fit in the current environment.
Commentary
Uniform Mortgage‑Backed Security Initiative (‘Single Security’)
Many of us who grew up as children of children of the Great Depression may recall our parents imploring us to “Stop throwing good money after bad!” in any number of situations, even if we didn’t always heed their wisdom.
Commentary
Issuer Engagement Is Crucial to the Future of Sustainable Investing
We believe that ESG investing is not only about partnering with issuers who already demonstrate a deeply integrated approach to ESG, but also about engaging with those who wish to move forward with their ESG initiatives. We believe that successful engagement can reduce credit risk, unlock value and influence positive impact.
Commentary
U.S. Commercial Real Estate: Selectivity in a Range‑bound Environment
We maintain a neutral outlook for U.S. commercial real estate prices overall this year, following a 3% to 5% decline from their 2015 peak.
Commentary
Issuer Engagement Is Crucial to the Future of Sustainable Investing
We believe that ESG investing is not only about partnering with issuers who already demonstrate a deeply integrated approach to ESG, but also about engaging with those who wish to move forward with their ESG initiatives.
Commentary
The Beginning of the End? Key Takeaways From PIMCO’s Cyclical Outlook
Stormy weather was abundant in March: spring snowstorms in the Northeast of the U.S., a trade tussle with China that could escalate into a trade war, hawkish personnel changes in the White House, a Powell-led Federal Reserve that expects to overshoot the neutral policy rate, and the worst week for U.S. equities since January 2016.
Commentary
The Beginning of the End?
The global expansion is either nearing its demand-driven peak or in the early stages of a supply-driven renaissance. We share our assessment and portfolio positioning.
Commentary
Fed Outlook: Headwinds Shift to Tailwinds, But Pace of Hikes Still Gradual
The U.S. Federal Reserve’s announcement of another 25 basis point hike in the fed funds rate range to 1.5% to 1.75% was widely expected by us and by markets. The more interesting aspect of the March FOMC (Federal Open Market Committee) meeting is the change to central bank officials’ forecasts.
Commentary
Inflation Rebound Signals China Is No Longer a Source of Global Disinflation
Strong Chinese Consumer Price Index (CPI) data for February suggest the world’s second-biggest economy will no longer be a source of global disinflation.
Commentary
What the MSRB’s Markup Disclosure Rule Means for Muni Investors and Advisors
The Municipal Securities Rulemaking Board (MSRB)’s new “markup disclosure rule” is on track to go into effect in the U.S. in May 2018, as part of a broader move toward greater transparency in the municipal bond market.
Commentary
PIMCO Income Update: Finding Value in Volatile Markets
We believe that balancing higher-yielding assets with higher-quality assets is the best way to achieve the strategy’s objectives across different market environments.
Commentary
Trump, Tariffs and Trade: Three Takeaways for Investors
We believe the trade actions with the most significant potential economic and market impact have yet to unfold.
Commentary
U.S. Core CPI Moderates in February, With Few Surprises in the Readings
We saw little to surprise in February’s U.S. Consumer Price Index (CPI) inflation print: Core CPI (excluding food and energy prices) gained 0.18% month-over-month, a moderation from January’s 0.34% gain, and held steady at 1.8% year-over-year.
Commentary
All Asset All Access, March 2018
In this issue, Research Affiliates discusses positioning for potentially volatile markets and the link between equity valuations and macroeconomic conditions.
Commentary
Diversifying Risk, and Risk‑Takers, in Investment Management
PIMCO’s new partnership with the organization Girls Who Invest is one more step toward a more inclusive financial services industry. It is also an act of conviction.
Commentary
Demystifying the Weak Dollar Puzzle
Market participants have been puzzled by the decline in the U.S. dollar since the November 2016 election. Expectations over future central bank moves and short-term interest rates offer one explanation – and potentially a signal about the dollar’s future.
Commentary
Commodities Outlook 2018: Still Bright
Everyone seems to be a commodities bull lately. PIMCO is no exception: Our latest Asset Allocation Outlook suggests an overweight to real assets, including commodities.
Commentary
Asset Allocation Views: Singles and Doubles
With market volatility on the rise, consider a broad set of relative value opportunities across global markets.
Commentary
Oil and the Uphill Road to Fiscal Balance in the Middle East
A recent visit to the United Arab Emirates (UAE), Oman and Bahrain showed just how much the region’s fortunes are still levered to oil prices, despite the efforts of several countries to diversify.
Commentary
The Next Correction?
Last March, we wrote a piece entitled “Equity Repricing Under a New Administration: A Tail Risk Scenario.” We posited that the proposed pro-growth tax and spending policies of the Trump administration, thrust onto an economy nearing full capacity, could lead to a general rise in the inflation rate and ultimately the real rate of interest.
Commentary
Alternative Investments for Wealth Management Portfolios
Many investors are now willing to sacrifice liquidity in the search for higher yields, more attractive risk-adjusted returns and the flexibility to hedge against downside risk.
Commentary
Defined Contribution: Four Themes for 2018 and Beyond
In our view, the prospective low-return environment calls for a capital-efficient approach that pairs actively managed bonds with passive or enhanced equities in target-date, core and retirement-income allocations.
Commentary
What’s Next for Investors in the Bond Market
Recent market volatility suggests that investors are questioning whether the post-crisis subpar pace of economic growth, which we dubbed The New Normal, is subsiding, to be replaced by more traditional late-cycle outcomes – in particular faster inflation and tighter monetary policy.
Commentary
U.S. Core CPI Accelerates in January on Post‑Holiday Retail Bounce
U.S. inflation continued to accelerate in January, with a 0.349% month-over-month advance in core Consumer Price Index (CPI) inflation (which excludes food and energy prices) – the strongest gain since 2001.
Commentary
Unconstrained: How Bond Investors Can Embrace Volatility
Untethered to traditional bond benchmarks, unconstrained bond strategies can respond to current changing market conditions in various ways.
Commentary
Regime Change in Bond Markets?
With a steady repricing of global bond markets having contributed to a sharp plunge in global stock markets, there could be a whiff of a new era in the air.
Commentary
U.S. Housing Finance Reform: Why Fix What Isn’t Broken?
The topic of housing finance reform has come in and out of focus on Capitol Hill since Fannie Mae and Freddie Mac (the government-sponsored enterprises, or GSEs) were taken into conservatorship back in 2008.
Commentary
Looking Past Volatility
PIMCO takes a long-term view of markets and economies, one that anchors investment decisions during shorter-term periods of market volatility. Nonetheless, the dramatic return of market volatility has understandably unnerved many investors.
Commentary
Hot Out of the Gate
A monthly review of market-moving events across countries and asset classes, and what investors can expect going forward.
Commentary
Are Equity Markets Anticipating a Macroeconomic Regime Change?
The U.S. economic numbers released last week preceded a slide in equities, prompting keen interest in what the data may have been signaling to markets.
Commentary
2018 Outlook: Looking Beyond Market Volatility
With the dramatic spike in market volatility over the past week, many investors are asking what comes next.
Commentary
Munis in Focus: 2018 Municipal Market Outlook
We expect policy will continue to drive municipal bond markets in 2018, if more constructively than in 2017. Municipal investors may remember 2017 as the year of unrealized policy fear. While the threat of tax reform and its potential to reduce the value of the muni exemption for retail investors loomed large, ultimately it had little impact on individual municipal bonds.
Commentary
The Fed: More Confident on Outlook and Inflation Target
Going into Federal Reserve Chair Janet Yellen’s 32nd and final meeting, neither we nor the markets expected the Fed to make much news. Of note, however, in its statement after the meeting on 31 January, the Fed acknowledged recent firmer economic data and expressed confidence in inflation moving toward the 2% target later this year.
Commentary
Winning the Cold Currency War
Investors in Europe are more optimistic than they have been in years, but there is growing concern that U.S. dollar weakness could make the euro too strong.
Commentary
Eurozone Outlook: Economic Growth Masks Underlying Fragility
Economic recovery is in full swing but investors should remain vigilant of the long-term risks.
Commentary
BOND: Going Active in Core Bond ETFs
Fixed income exchange-traded funds (ETFs) saw a record $126 billion of inflows in 2017, bringing the overall market to nearly $600 billion. The majority of these flows, as well as existing assets under management, are in passive bond ETFs. But are passive, index-tracking approaches the best way to harness the fixed income opportunity set?
Commentary
Oil and Gas MLPs: Poised for a Rebound in 2018
After a four-year downturn in the oil and gas master limited partnership (MLP) sector, marked by a roughly 47% decline in market value, we believe sentiment toward the sector may be turning. With dividend yields approaching 8% – along with increasing free cash flow and a robust U.S. production outlook...
Commentary
U.S. Policy Outlook for 2018: Expect Action on Trade and Government Spending
Although much of 2017 represented a series of fits and starts in Washington, the Trump administration and the Republican-led Congress ultimately – and against long odds – delivered on one of their biggest campaign promises: a relatively sweeping rewrite of the tax code, representing a likely boost to 2018 U.S. real GDP of 0.2%–0.3%.
Commentary
To Be (20)17 Again
Like much of 2017, politics remained keenly in focus at the end of the year. Tax reform took center stage in the U.S., and President Trump wrapped up this major legislative victory just in time for the holidays. The sweeping tax overhaul moved quickly through both chambers of Congress after the House and Senate drafted amended versions from the separate ones each had previously passed.
Commentary
Investment Grade Credit: Be Actively Aware of BBB Bonds
Years of significant growth in the U.S. corporate bond market have been accompanied by a steady decrease in overall credit quality and a trend toward higher leverage. Close to $80 billion in U.S. corporate bonds currently rated BBB potentially could be downgraded below investment grade in 2018, according to our estimates.
Investors may want to consider taking a more cautious and selective approach to BBB nonfinancial corporate bonds, particularly those in the low BBB rated segment, where the risk of downgrades is higher and the room for error is lower.
That said, we find many compelling BBB bonds in the U.S. marketplace today. As a large active fixed income manager, PIMCO is in our view ideally positioned to manage the risks in the complicated universe of BBB bonds.
Commentary
All Asset All Access, January 2018
In this issue, Research Affiliates provides its outlook for 2018 and discusses where it sees attractive return opportunities across the globe.
Commentary
Equity Factor Investing: Three Key Considerations
Equity investors in search of higher returns are increasingly turning to factor investing. Driving this trend is frustration with the underperformance and higher fees of traditional active equity approaches, along with a growing realization that many stock-picking strategies owe their results largely to the manager’s factor tilts rather than stock-specific risk.
Commentary
Peak Growth: Three Reasons the Global Economy Could Top Out in 2018
The conclusion from PIMCO’s latest Cyclical Forum is that 2017–2018 could well mark the peak for economic growth in this cycle and that investors should start preparing for several key risks that lie ahead in 2018 and beyond.
Commentary
Are Emerging Markets Still on High Ground?
After a strong run in emerging markets through the first nine months of 2017, a recent performance setback in local bond markets has led some investors to fear that the recovery cycle may be short-circuiting. Is the two-month run of underperformance in EM local markets an opportunity or a canary in a coal mine?
Commentary
Peak Growth
We expect the global expansion to continue in 2018. Yet investors should prepare for both the consequences of policy shifts and the opportunities presented in more difficult market conditions.
Commentary
Political Noise, Market Poise
A review of last month’s market-moving events across countries and asset classes.
Commentary
Tax Reform: There’s Will, But Is There a Way?
Congressional Republicans’ efforts to reduce taxes and reform certain elements of the U.S. tax code have been impressive thus far. In a matter of weeks, the House has passed its version of a bill, and the Senate is hoping to take up its own bill later this week.
Commentary
Firming U.S. CPI Supports Forecast for 2% Inflation in 2018
Core U.S. Consumer Price Index (CPI) inflation rose 0.22% month-over-month in October, broadly in line with expectations for firming price trends but notably stronger than the 0.14% average monthly pace this year.
Commentary
Benefiting From Flexibility: Opportunities in Multi‑Sector Credit
As many traditional credit sectors begin to approach full valuations, credit investors may want to look in new directions for attractive returns with manageable downside risk. In diversified credit portfolios today, de-risking and building liquidity are important, but we also see attractive relative value opportunities in a couple of (sometimes overlooked) sectors.
Commentary
Extra Innings
A review of last month’s market-moving events across countries and asset classes
Commentary
The Thorny Transition from Libor to SOFR
The transition from Libor to SOFR as a benchmark short-term rate needs to be undertaken with tremendous care, and PIMCO would like to help by outlining clear steps for stakeholders...
Commentary
Munis in Focus: Adjusting the Sails
How we’re positioning muni portfolios for turbulence – and the opportunities it may create.
Commentary
Addressing the Non‑Performing Loan Problem in Europe
Creative solutions may be needed to address remaining asset quality issues in Europe’s banks.
Commentary
Hedging for Profit: A Novel Approach to Diversification
With stocks hitting record highs, many investors want to mitigate the largest source of risk in their portfolios – equities. In recent decades, fixed income has served this purpose well. The asset class has generally delivered both positive returns and negative correlations with equities.
Commentary
The Powell Fed: Continuity in Monetary Policy
President Trump has announced Fed Governor Jerome Powell as his nominee for Chair of the Federal Reserve Board. A Fed governor since 2012, Powell has been confirmed twice by the U.S. Senate and likely will be confirmed as chair without controversy in time to take over when current Chair Janet Yellen’s term expires in February 2018.
Commentary
The Bank of England’s Dovish Hike
For the first time in over 10 years the Bank of England raised its official policy rate, a hike of 0.25% to 0.5%. The rationale is a combination of growth continuing at or slightly above trend, unemployment falling further from its current 42-year low...
Commentary
Fed on Track for a December Rate Hike
One could argue that this latest statement came in on the dovish side. But a broader read rapidly dispels that notion.
Commentary
ECB Preview: Expect Emphasis on Forward Guidance, Continued Tapering
Our central expectation for the European Central Bank (ECB) meeting on 26 October is for the Governing Council to extend asset purchases by nine months at €30 billion per month to September 2018, without yet committing to a specific end date, while strengthening its commitment to keep policy rates and the balance sheet unchanged when asset purchases end next year.
Commentary
Active Short‑Term Strategies: Swimming Clear of Rate Hike Riptides
Actively managed front-end strategies may be able to mitigate the erosion of real capital experienced in passive benchmarks as rates rise.
Commentary
The Global Factor in Neutral Policy Rates
A global factor helps explain why central bank policies often tend to be correlated across countries.
Commentary
Navigating U.S. Wealth Management: Five Key Themes for Financial Advisors and Individual Investors
Unprecedented changes are reshaping the financial advice industry and affecting portfolio construction for individual investors. New regulation, technological innovation, capital market trends and the prospect of lower future returns are all exerting profound effects.
Commentary
Japan’s Election: ‘TINA’ to Abe
The governing coalition of Abe’s Liberal Democratic Party (LDP) and the smaller Komeito Party staged a big win in the snap election. Although recent public polls indicated a victory, the final tally was on the higher side of consensus expectations, including ours.
Commentary
Australian Interest Rates: Like Watching Grass Grow
If the pace of monetary tightening in the U.S. is any sort of leading indicator for policy tightening in the rest of the world, including Australia, then in Australian parlance, it will be “like watching grass grow.”
Commentary
5 Things to Know About Emerging Markets
Emerging markets debt and equity have many overlapping traits, but also differ in their exposure to countries and risks. The MSCI Emerging Markets Index contains 27 countries, with the five largest accounting for 70% of market value. Three countries in Asia - China, South Korea and Taiwan - comprise more than 50% of the index.
Commentary
Ten Investor Takeaways From the IMF/World Bank Meetings
Global central bankers, ministers of finance and representatives from the private sector and civic groups gathered in Washington, D.C., last week for the Annual Meetings of the IMF (International Monetary Fund) and the World Bank Group.
Commentary
Another Weak Inflation Report Won’t Help the Fed’s Dilemma
Despite a hurricane-related surge in headline inflation, core inflation continued to run softer than expected in September, a trend that could make the Federal Reserve more cautious about hiking interest rates in December.
Commentary
Drying Paint or Boiling Frog?
Last Month in Perspective: The convoy of developed world central banks reducing policy accommodation appeared to gather steam. Global political developments continued to capture headlines. Interest rates moved higher on the hawkish tilt in central bank rhetoric, and equities gained on generally positive economic data.
Commentary
Will Fannie and Freddie Draw From the Treasury? Much Ado About Nothing …
Policymakers in Washington have recently expressed growing concerns about the (planned) dwindling of capital levels at Fannie Mae and Freddie Mac – the two government-sponsored enterprises (GSEs) that help finance the vast majority of U.S. mortgages.
Commentary
Emerging Markets Outlook: Constructive, But for Investors the Work Begins
While PIMCO’s cyclical outlook is cautious overall, our outlook for emerging markets ex-China (EM) is more constructive. We expect further improvement in the EM macro picture as most emerging economies are at a different stage of the economic cycle than developed economies and they are still benefiting from relatively easy global policy conditions.
Commentary
Corporate Crossover Bonds in the Sweet Spot
The unique attributes of corporate crossover bonds may offer solutions for investors assessing a range of objectives and risks.
Commentary
China’s 19th Party Congress: A New Cycle?
Considered the most important political event in China, the National Congress of the Communist Party, held once every five years, has the potential to reshape the political landscape of personnel, policy and institutions for the next decade.
Commentary
(Not Too) Late-Cycle Positioning in an Aging Expansion
We believe it’s not too late for investors to seek attractive relative value opportunities and reposition equity exposures in this aging cycle.
Commentary
Oil Market Shifts From Contango to Backwardation: Implications for Investors
In recent weeks Brent crude oil, the global oil benchmark, has shifted into backwardation – a state when spot prices are higher than prices for futures contracts, creating a downward-sloping curve for futures prices.
Commentary
When a Fact May Not Be a Fact and So What
An analysis of default rates and government intervention since the financial crisis.
Commentary
Russia: Growth Up, Inflation Down
Russia has been front-and-center of the news this summer. Yet Western sanctions over Crimea, fallout from the investigation into meddling in the U.S. presidential election and last month’s bailout of the nation’s largest privately held bank have failed to thwart Russia’s emergence from stagflation.
Commentary
Tax Reform: Challenges Ahead
With great fanfare, the White House and Republican congressional leadership released their long-awaited framework for tax reform, but many politically thorny issues need to be resolved – and quickly – before investors can feel confident that tax reform will materialize in the coming months.
Commentary
Protecting Portfolio Value: Constant Proportion Portfolio Insurance Versus Tail Risk Hedging
Tail risk hedging seeks to protect gains without loss of upside equity potential.
Commentary
German Elections: Not So Steady As She Goes
Broad-based support for Europe among Germany’s key political parties vying for seats in the Bundestag’s 19th legislative period meant Sunday’s election was unlikely to be disruptive for financial markets. And the muted reaction in financial markets Monday morning confirmed this was the case.
Commentary
Oil and Gas MLPs: Time to Take a Fresh Look?
Master limited partnerships, once considered utility-like yield instruments, have come to be viewed largely as leveraged commodity investments – but is the pendulum about to swing back?
Commentary
Fed Balance Sheet Normalization: Signed, Sealed, Delevered
Going into today’s important Federal Reserve meeting (with a press conference and an update to the economic projections, aka the “dot plot,” along with the usual statement), we at PIMCO along with most market participants expected the Fed to announce formally the start of balance sheet reduction this fall, perhaps in October. And that’s exactly what the Federal Open Market Committee (FOMC) did.
Commentary
Are Diversifying Assets Up Next in the Return-Seeking Cycle?
After a sustained period of return leadership by U.S. stocks, a number of diversifying assets now appear poised for outperformance.
Commentary
CPI Finally Accelerates – A Small Sigh of Relief for the Fed
As many observers expected, after five months of surprisingly soft inflation prints, prices firmed in August. U.S. core CPI inflation (which excludes the volatile food and energy categories) was up 0.25%, boosted by the largest-ever one-month increase in hotel prices and surprising firmness in rents and owners’ equivalent rents (OER).
Commentary
Rolling with the Punches
A review of last month’s market-moving events across countries and asset classes.
Commentary
Opportunities in U.S. Commercial Real Estate Debt Investing
Unmet borrower needs continue to grow in the U.S. commercial real estate lending market.
Commentary
ESG in Action: Evaluating Global Financials
Analysis of environmental, social and governance factors (ESG) is particularly important for bank investments because the confidence of their depositors and borrowers largely drives banks’ valuations.
Commentary
Managed Futures Strategies: Inside the “Black Box”
Momentum, trend-following, managed futures - are terms that can seem intimidating and opaque for many investors. But, while these types of investment strategies may be less familiar than traditional strategies, they can be quite intuitive and offer attractive diversification and return potential that is worth getting to know.
Commentary
Getting More From Your LDI Portfolio
Our approach to investing in long duration and long credit portfolios has delivered meaningful alpha over most market cycles.
Commentary
Congress’ Must‑Do List Is Looking More Doable, but After That …
After an uncharacteristically eventful August in Washington, Congress returns to D.C. for an even busier fall: In September, it has a mere 12 legislative days to fund the government for fiscal 2018 (and thus avoid a shutdown), raise the debt ceiling and address a smattering of other must-pass bills...
Commentary
Retirement Savings: Why Hedging Inflation Is Important
Although inflation may seem a distant threat, even modest inflation can prove devastating to retirees who depend on income that does not adjust with inflation.
Commentary
BOJ: Rethinking the Mandate
Who will be the next governor of the Bank of Japan (BOJ)? This is an important question to be answered in the next several months, as Governor Haruhiko Kuroda’s current term will expire in April of next year.
Commentary
Asset Allocation Views: Preparing for Pivot Points
With critical policy pivots on the horizon, investors should approach asset allocation with full appreciation for downside risk and stay focused on relative value and security selection.
Commentary
Mixed U.S. Energy Earnings Reinforce Credit Views and Outlook for Range‑Bound Oil Prices
U.S. exploration and production (E&P) companies delivered mixed second-quarter earnings results and guidance, with evidence of operational missteps by certain Permian Basin producers. One particular large producer’s report of drilling delays, higher planned well costs and higher gas-to-oil ratios sparked broader concerns about whether Permian producers can maintain efficiencies and execute on plans to drill larger wells.
Commentary
China: When Atlas Shrugs, Markets Shiver
The use of credit to fuel growth in China is weakening, a trend that has begun to depress demand for imports. Given China’s seminal role as an engine of global growth, the ripple effects will weigh on growth prospects for the countries most exposed to Chinese demand, including those in Asia and Latin America.
Commentary
Fed Balance Sheet Tapering: We Gotta Have Faith
The news coming out of the July Federal Open Market Committee (FOMC) meeting was a reference in the statement that the Federal Reserve expected to begin to implement its balance sheet normalization program “relatively soon,” which we (along with many market participants) took to mean at the upcoming September meeting.
Commentary
Banking on Change
A review of last month’s market-moving events across countries and asset classes
Commentary
Time to Run the U.S. Economy a Little Hot?
Following another underwhelming U.S. CPI report, it’s now entirely possible that core personal consumption expenditures (PCE) inflation – the Federal Reserve’s preferred measure, currently at 1.5% – will end the year at 1.3%, a far cry from the central bank’s 2% target.
Commentary
Weak U.S. CPI Underscores Unlikelihood of Another Fed Hike in 2017
Another underwhelming rise in the U.S. core Consumer Price Index (CPI) reported on Friday increases the chances that Federal Reserve policymakers use the September meeting to signal they plan to abstain from additional interest rate hikes until next year.
Commentary
China Leads Emerging Asia to Greater Role in Capital Markets
Over the next 12 to 24 months, we expect that Asia, led by China, will become a far more significant part of the global capital markets – and global investment portfolios.
Commentary
A Troubled U.S. State Budget Process Puts Muni Investors on Alert
Outcomes from the most recent state budget season, which concluded for most U.S. states on 30 June, underscore the need for caution among municipal bond investors.
Commentary
Preparing for Pivot Points
With critical policy pivots on the horizon, investors should approach asset allocation with full appreciation for downside risk and stay focused on relative value and security selection.
Commentary
Emerging Market Local Debt: Growing Depth, Growing Opportunity
Earlier this year, Argentina, the Czech Republic and Uruguay joined the bellwether benchmark for the asset class, JPMorgan GBI-EM Global Diversified, taking the total to 18 countries. China, Egypt and another three countries may enter the index next year. The inclusions will make the EM local debt asset class much larger, deeper and more liquid.
Commentary
Interest Rates: How Superstar Firms Depress R‑Star
Over the past quarter century, large and ever-larger companies have significantly increased their share of total intra-industry sales across a majority of industries. These superstar firms – including Facebook, Amazon, Apple, Netflix and Alphabet’s Google (known collectively as FAANG) – increasingly dominate their respective industries in terms of revenues, profits and stock market capitalization. The winner these days may not take all, but most.
Commentary
Japanese Politics: Caution Warranted
After Japan’s Prime Minister Shinzo Abe reshuffled his Cabinet on 3 August, the big question is whether his administration can regain public support. In just the last two months, Abe's public approval ratings have plunged to around 30% – low enough to raise red flags.
Commentary
Munis in Focus: Credit Risk or Opportunity? Analyzing Munis Today
The muni backdrop looks benign, but be mindful of potential credit risks.
Commentary
The Coming Financial Volatility
Bond investors are from Mars, and central bankers are from Venus – or so suggests the bond market’s negative reaction to signals that the exceptional monetary policy accommodation of the last decade is winding down. Risk-asset markets, however, are ignoring the red flags that the bond markets are waving. Are they right?
Commentary
Looking Past Libor: What’s Next for Investors?
The UK Financial Conduct Authority (FCA) announced on 27 July that it would not sustain the London Interbank Offered Rate (Libor) – the key (and controversial) benchmark for hundreds of trillions of derivatives contracts – after 2021.
Commentary
European Periphery: Unsafe at Any Speed?
Five years ago this week, Mario Draghi’s landmark “whatever it takes” speech turned the tide of the euro crisis, the president effectively clarifying the European Central Bank’s role as a conditional lender of last resort to eurozone sovereign borrowers.
Commentary
Trump’s Victory: What’s Next for Currencies?
Much of the world has been waging a cold currency war since the autumn of 2016, and so far the winner is Donald Trump. The dollar rally that followed the U.S. election is over, and this past week the U.S. Dollar Index (DXY, which tracks the dollar’s value versus a weighted basket of major currencies) sank to its lowest level in more than a year.
Commentary
China and Emerging Asia: A New Dawn for the Capital Markets
Asia’s integration into world financial markets may be accelerating.
Commentary
Europe’s Long‑Term Economic Outlook: Better Now, Challenges Ahead
When PIMCO professionals gather for our annual Secular Forum to discuss the long-term global economic outlook, views on Europe invariably gravitate on two themes: anemic GDP growth and political risk.
Commentary
Housing Finance Reform: First Things First
Why is the U.S. housing sector diminishing when demand for housing remains robust?
Commentary
The Fed Balance Sheet and the Taper Tantrum That Ain’t (Yet)
The Federal Reserve is likely to begin normalizing its balance sheet in 2017. Why hasn’t this news rattled the bond market?
Commentary
Continued Weak Core CPI to Test the Fed
A growing number of Federal Open Market Committee officials have voiced concerns over decelerating inflation since the June FOMC meeting, and the latest inflation print likely did little to alleviate them.
Commentary
Political Shakes, Monetary Withdrawal
A review of last month’s market-moving events across countries and asset classes.
Commentary
In Search of Yields, Are Cash Investors Becoming Complacent About Risk in Prime Funds?
Since the global financial crisis, the notion of what constitutes an appropriate liquidity management and capital preservation strategy has become a source of heated debate among professional institutional investors and retail-oriented allocators alike, with varying opinions on how to balance a preference for returns against the need for immediate liquidity and capital preservation.
Commentary
Long‑Term Outlook for Australia: Less Rosy
After 25 years of steady economic growth, Australia is on the verge of wresting bragging rights from the Netherlands for the longest period on record without a recession. While this historic event should be celebrated, the future may not be as rosy.
Commentary
Avoiding Passive Pitfalls in Municipal Strategies
An active approach to the complex, fragmented municipal bond market may help investors avoid several common drawbacks of passive strategies.
Commentary
Time to Tend Your Hedges?
Equity market peaks (and troughs) are impossible to identify in advance. But this doesn’t mean that equity investments should simply be “set it and forget it.”
Commentary
Fed Minutes: Mission Accomplished on Rates, But Questions Remain on Balance Sheet Plan
The Federal Reserve hiked rates as expected at its meeting on 13–14 June 2017, and it made news by providing important details about its plans to normalize its balance sheet. However, one crucial detail the Fed did not provide: when it will commence that process of balance sheet normalization.
Commentary
ECB Policy: Are Markets Overreacting to Draghi?
Normalization of the European Central Bank’s (ECB) monetary policy never was a question of “if” but one of sequencing, timing and calibration. Financial markets reacted to ECB President Mario Draghi’s speech in Sintra this past week in a way suggesting the ECB might change all three of those policy normalization parameters.
Commentary
All Skewed Up? The Active Versus Passive Debate
There has been a lot of discussion about a recent academic paper, "Why Indexing Works," which makes a statistical case for passive investing in equities. The same logic applied to bonds, though, may make the opposite case: Passive fixed income management doesn't work, but active bond management does.
Commentary
Politics to Shape the UK’s Long‑Term Outlook
Just as the global economy faces a number of important pivot points that investors should look for over the next several years, so some domestically generated pivot points will shape the UK economy in the coming years – largely stemming from UK politics.
Commentary
What the Latest Healthcare Hiccup Means for the U.S. Economy
The effort to repeal and replace “Obamacare” hit yet another stumbling block this week when U.S. Senate Majority Leader Mitch McConnell decided to pull the bill from consideration after realizing he did not have sufficient votes for it to pass.
Commentary
Asia’s Long-Term Outlook: All Eyes on China’s Party Congress
The global economy faces several potential pivots in the direction and scale of monetary, fiscal, trade, geopolitical and exchange rate policies. One in particular will help determine the long-term outlook for China and emerging Asia.
Commentary
10 Reasons ESG Investing Is Growing
According to the Global Sustainable Investment Alliance, over $22 trillion of assets were managed under responsible investment strategies globally in 2016, up 25% from two years before. This is one of many statistics showing Environmental, Social and Governance (ESG) investing moving into the mainstream. We see 10 major trends contributing to the rise.
Commentary
Harnessing Uncertainty: Five Opportunities in the Core Bond Market
This is an exciting time to be an investor, but it’s also a very uncertain one. Risks to both the upside and downside are much higher than they were even a year ago.
Commentary
The Prize and the Price of Opportunistic Tightening
The U.S. bond market’s post-election optimism has now evaporated: The 10-year nominal U.S. Treasury yield has dropped by almost half a percentage point from its mid-March 2.62% post-election high, with lower implied inflation rather than lower real yields accounting for most of the decline.
Commentary
Emerging Markets: Commodity Oddities
Why falling commodity prices may not upend the EM rally.
Commentary
CPI Lags Expectations for a Third Straight Month
Another soft U.S. core Consumer Price Index (CPI) inflation report – the third in a row that has lagged expectations – could complicate the Fed’s intentions to raise rates one more time this year, as the central bank’s Summary of Economic Projections currently forecasts.
Commentary
Four Reasons Why the Fed’s Balance Sheet Unwind Shouldn’t Rock the MBS Market
Market participants increasingly expect the Federal Reserve to begin unwinding its balance sheet during the second half of 2017, and many have speculated that the agency mortgage-backed securities (MBS) market – and the U.S. housing market more broadly – could suffer as a result.
Commentary
Economic Growth Amid Policy Shifts
Political risk, reform efforts and potential monetary policy shifts cloud the outlook for China, Europe and the U.S.
Commentary
New Bond Issuance: The Active Management Advantage
New equity offerings can garner media buzz. Think of recent initial public offerings (IPOs) by Snapchat, Alibaba and Visa. Business media enthuse, investors clamor, and share prices often rise, at least initially.
Commentary
Politics: The Greatest Show on Earth?
A review of last month’s market-moving events across countries and asset classes
Commentary
2017 Secular Outlook: Pivot Points
With the probability of recession sometime in the next five years around 70% in our view, now may be a critical time to prepare for when the cyclical tailwind that began last year begins to fade. Over the next five years, the global economy may undergo five significant pivots in the direction and scope of monetary, fiscal, trade, geopolitical and exchange rate policies. Are investors too optimistic about the future economy? We address this and other crucial questions in PIMCO’s 2017 Secular Outlook – our long-term view for the global economy and markets.
Commentary
For the UK, Is the Real Risk Above- or Below-Target Inflation?
In its recent quarterly inflation report, the Bank of England gave the market some fascinating insights into the challenges it will face in setting appropriate monetary policy over the coming years.
Commentary
Getting More From Your Equity Allocation
How can equity investors address the triple threat of a low return environment, scarcity of alpha and the tendency to chase performance?
Commentary
The Sources, Benefits and Risks of Leverage
When evaluating investment strategies it’s critical to understand the nature of the leverage being used.
Commentary
ESG in Action: Evaluating European Utilities
Why understanding Environmental, Social and Governance (ESG) factors is critical for credit analysis of European utilities.
Commentary
OPEC and Oil Prices: Looking Ahead to the May Meeting
The oil market outlook is always a bit complicated, in part due to the impact OPEC can have on balances. For all the attention paid to changes in U.S. shale output, OPEC is capable of swinging oil balances more in a single month than U.S. shale can in a year.
Commentary
Take Action: Five Ideas for DC Plan Sponsors
Active management has the potential to provide diversification, generate income and mitigate the risks of higher inflation and rising rates.
Commentary
Puerto Rico's Title III Bankruptcy: Initial Views and Expectations
In many ways the filings may mark “the end of the beginning” (as Churchill once said) of this chapter for Puerto Rico.
Commentary
No Single Culprit for April’s Weak U.S. CPI
Unlike in March, April’s soft inflation across a range of core goods and services prices cannot be explained away by large, one-off price adjustments or other quirks in the data.
Commentary
All Asset All Access, May 2017
In this issue, Research Affiliates offers insight into its CPI-based secondary return benchmarks, its business cycle modeling and continued opportunities in emerging markets.
Commentary
Vive La Rally!
A review of last month’s market-moving events across countries and asset classes.
Commentary
French Election: A Positive Result for Markets, But Don’t Be Complacent
Centrist candidate Emmanuel Macron will be inaugurated as the next French president on 14 May, thanks to a clear win in the second-round runoff against the far-right candidate Marine Le Pen.
Commentary
Brazil: Lower Rates for Good?
Brazil is often known for soccer, samba and pristine beaches. Among investors, something else also stands out about Brazil: double-digit interest rates that are significantly higher than its peers’ (see chart). That may soon change.
Commentary
Productivity: A Surprise Upside Risk to the Global Economy?
A bottom-up look at major industries around the world reveals significant potential for productivity growth.
Commentary
Higher Mortgage Rates Are Likely With Proposal of ‘Single Security’
The Federal Housing Finance Agency’s proposal to increase liquidity and reduce costs to taxpayers could actually lead to reduced liquidity and higher mortgage rates.
Commentary
Trump’s First 100 Days: Should Investors Take Notice?
Looking at several metrics – legislative achievements, staffing in key areas and executive orders – President Trump’s first-100-day track record has been mixed.
Commentary
Brighter Outlook for Commodities Suggests a Fresh Look at Investment Benefits and Risks
Though uncertainties remain, we have a broadly positive outlook for commodities in the next year.
Commentary
A Fortuitous Coincidence for the ECB
PIMCO expects no policy changes at the ECB Governing Council meeting on Thursday, aside from a minor adjustment to the bank’s outlook for growth. We think ECB President Mario Draghi will repeat the message that although the economic recovery is gaining momentum...
Commentary
Peru’s Resilience
Many investors are concerned about the risks to growth and the potential for higher inflation in Peru following two recent shocks.
Commentary
French Election: Near‑term Risks Recede But Caution Still Warranted
Markets breathed a sigh of relief today as the moderate centrist candidate Emmanuel Macron qualified for the second round of the French presidential election in two weeks, together with the far-right anti-establishment candidate Marine Le Pen.
Commentary
Why Has U.S. Stock Market Volatility Collapsed?
If you had asked that question at the end of February this year, you could have plausibly pointed to two key factors to explain the drop in volatility. First, the U.S. equity market (as measured by the S&P 500) had rallied 10% since November’s surprise election of Donald Trump – and rallies in equities typically are accompanied by drops in volatility.
Commentary
Bonds Are Different: The Active Advantage
Ask an investor if most active bond funds outperform their passive counterparts and the response is likely to be "no."
Commentary
A House Divided
A review of last month’s market-moving events across countries and asset classes.
Commentary
Not So Fast
Don’t get too excited about the recent rise of headline U.S. inflation above the Fed’s target.
Commentary
The Fed’s Balance Sheet: Some Insights in March Minutes, But Questions Remain
The way in which the Fed normalizes its balance sheet will have important implications for markets.
Commentary
Scaling Back: A Look at Six Key Macro Risks and Economic Drivers
We are now more confident in our baseline view that the global economic expansion will be strengthening and broadening over our cyclical horizon.
Commentary
Income Fund: 10 Years of Meeting the Income Challenge
It’s hard to imagine a more challenging decade for income investors than the past 10 years. It was bookended by the great financial crisis and the surge in populist politics that led to the election of Donald Trump as U.S. President.
Commentary
Emerging Markets: The Clouds Lift
As 2017 progresses and the priorities of the Trump administration take shape, the outlook for emerging markets (EM) has evolved from uncertain to promising.
Commentary
Healthcare Reform’s Demise: Tax Reform Will Be Hard, Too
After the healthcare bill stalled in the House of Representatives, the most salient question is what’s next?
Commentary
Canada’s ‘Wait and See’ Budget
As expected, Ottawa presented a cautious budget for 2017 that focused more on implementation than on bold new initiatives, and there is much to commend about Finance Minister Bill Morneau’s wait-and-see approach.
Commentary
Scaling It Back
We expect the global economic expansion to strengthen and broaden over the cyclical horizon, but with improved growth and inflation prospects, central banks may scale back accommodation.
Commentary
Fed on Inflation: ‘Stabilize’ … ‘Sustained’ … ‘Symmetric’
Although there was no drama in the Federal Reserve’s decision today to remove 25 basis points of accommodation (also known as a policy rate hike), there was a surprising – and laudable – amount of substance in the changes to the accompanying Fed statement.
Commentary
The Bank of England’s Corporate QE: A Middling Outcome
In August of last year, the Bank of England (BOE) announced a new round of quantitative easing (QE) that included the purchase of sterling-denominated corporate bonds. Alongside a cut in interest rates, the Corporate Bond Purchase Scheme (CBPS) was designed to boost the UK economy amid a more negative outlook post-Brexit.
Commentary
In Credit Research, Indexes Equal Opportunity
Changes in index composition represent a source of potential return for active bond managers.
Commentary
U.S. Jobs Report: What’s Behind the Uptick in Labor Participation?
Today’s U.S. labor market report solidified market expectations that the Federal Reserve will raise the fed funds rate by 25 basis points at its two-day meeting next week.
Commentary
Currency and QE: Ramifications of Questioning the Euro
The risk of redenomination, remote as it is, still complicates the European Central Bank’s exit from quantitative easing.
Commentary
UK Budget: No Alarms and No Surprises
The UK is about to enter a period of potential uncertainty, and the greatest gift the Chancellor can provide to the government is economic protection.
Commentary
The Case for ECB Tapering
There is a strong case for the ECB to continue tapering its QE programme, to alter its forward guidance and to begin normalising policy rates.
Commentary
European Banking Outlook: The Storm Has Passed
Why Europe’s banks may be on a sounder footing in 2017.
Commentary
The Pace of Trump’s Policy Agenda: Three Big ‘Ifs’
It’s hard to believe that U.S. President Donald Trump has only been in office for a month, given the dizzying activity in Washington. Yet our observations from before the inauguration seem to be holding true, at least so far: Governing is indeed harder than campaigning.
Commentary
Russia: Stagnant Stability
A recent trip to Moscow on the 100th anniversary of the 1917 revolution revealed not a whiff of revolutionary change in the economy, but rather stagnant growth mixed with structural stability. We could simply call it “stagnant stability.”
Commentary
French Election Jitters Underscore Caution When Investing in Europe
Market nerves in anticipation of the French presidential elections in April and May 2017 have driven a spike in 10-year French and Italian government bond spreads, which have climbed 30 to 40 basis points (bps) in recent weeks (to 75 bps and 195 bps over bunds, respectively).
Commentary
How the Fed’s Resolve Can Calm the Bond Market
The Fed could contain inflation fears in the bond market by taking a more hawkish stance.
Commentary
More Senior Than What? Potential Risks in Senior Bank Loans
Floating rate bank loans, which are typically the most senior debt in an issuer’s capital structure, have traditionally been considered more resilient than high yield bonds in the event of default.
Commentary
A New Phase in the Cold Currency War
One of the most interesting and, for many observers, surprising market developments year-to-date has been the gradual descent of the broad trade-weighted U.S. dollar from the lofty 14-year highs reached late last year.
Commentary
The Bank of England: How to Justify Doing Nothing
Ahead of Thursday’s quarterly Inflation Report, the Bank of England’s Monetary Policy Committee (MPC) faced a relatively tricky challenge.
Commentary
Eurozone Headline Inflation is Up, but Keep an Eye on Core
We see little probability of high core inflation rates in the eurozone, but instead a gradual increase toward the ECB target of just below 2% over the next few years.
Commentary
Canada's 2017 Economic Outlook: A Tale of Two "Tails"
Investors need to prepare for more extreme economic outcomes – both good and bad.
Commentary
Making Europe Great Again
President Donald Trump’s promise to put America first might actually help make Europe great again.
Commentary
Trump’s First Year: What’s Realistic
With the inauguration of the 45th president imminent and the market’s high expectations for policymaking, what is realistic for investors to expect from Washington in 2017?
Commentary
The Paradox of Chinese Drift
While Chinese growth looks stable into early 2017, a more marked slowdown by the second quarter appears inevitable.
Commentary
Turkey – A Rolling Challenge
Turkish asset prices have come under heavy pressure recently, and the Turkish lira fell to a record low against the U.S. dollar in January.
Commentary
Sustainable Development Goals: Common Goals, Our Approach, Your Impact
How the United Nations Sustainable Development Goals can serve as a framework for ESG investors
Commentary
Navigating Change: Opportunities in Quality Credit, Specialty Finance and Mortgages
The global economy is going through significant change, as Donald Trump’s incoming administration and shifts in public sentiment in other major economies create potential for new opportunities and risks.
Commentary
How Much Do I Need To Retire?
Grappling with the question of how much is one of the toughest relating to pensions
Commentary
Income Strategy Update: Active Positioning for a Volatile and Uncertain Environment
Markets have generally been risk-on since Donald Trump’s election as president. Yet tremendous uncertainty remains over future fiscal and monetary policies, and volatility persists at high levels.
Commentary
The New Cold Currency War
Earlier this year, we saw a transition from an old-style currency war (openly fought with negative interest rates and quantitative easing) to the “Shanghai co-op” – an implicit agreement, or truce, among major central banks that excessive dollar strength was bad for the global economy.
Commentary
The Fed Is Staring at a Nasty Rate Dilemma in 2017
Policymakers may have to juggle a rising dollar, higher yields and a lag in any Trump stimulus.
Commentary
Is It Really All About the Numbers?
Has the 70-80% replacement rate for retirement income met its use-by date?
Commentary
Will the Trump Administration Target the DOL Rule?
With deregulation seemingly high on the agenda for President-elect Donald Trump, the fate of the Department of Labor’s “fiduciary rule” is now unclear.
Commentary
Slower CPI Inflation: ’Tis the Season
The 15 December Consumer Price Index (CPI) release was more or less in line with expectations, but it did show a moderate deceleration in inflation from recent months.
Commentary
The Fed: Betting on Trumponomics
While most observers had expected correctly that the Federal Reserve would hike interest rates by 25 basis points today – markets had priced in literally a 100% chance – they did not think the Federal Open Market Committee (FOMC) would materially change its September projection for two hikes in 2017.
Commentary
Are Republican Presidents OK With Recessions?
You are probably familiar with the well-known statistic that, on average, the U.S. stock market has historically performed better when a Democrat rather than a Republican occupies the White House.
Commentary
Making America Reflate Again?
Donald Trump took the world by surprise in winning the U.S. presidential election.; While the Trump triumph and ensuing policy conjecture held the spotlight, a flurry of positive economic releases globally signaled solid fundamentals.; Risk sentiment built, particularly in the U.S.
Commentary
ECB Policy: 1% Is the New 2%
At its 8 December Governing Council meeting, the European Central Bank (ECB) extended its asset purchase program by nine months to the end of December 2017, but at a rate of €60 billion per month – a decrease from €80 billion currently.
Commentary
OPEC Deal Impresses, But Implementation Will Be Key to Prices
We believe the impact on balances and prices ultimately will depend on five key variables.
Commentary
New Paradigm?
Secular forces in the global economy suggest we aren’t likely to see a new paradigm of stronger growth, higher inflation and higher interest rates under the Trump administration.
Commentary
PIMCO's Global Advisory Board Surveys the World Economy
The board’s expertise constitutes a valuable input into our investment process.
Commentary
Fed Minutes and the Election: The Case for December Grows Stronger
The minutes reveal a committee that had expected to hike at the meeting on December 13-14. Developments since could only have strengthened the case.
Commentary
Breakeven Inflation Rates: What’s Beyond the Post‑Election Bump?
Trump’s fiscal and immigration policies appear likely to boost the near-term inflation trajectory.
Commentary
Beyond Libor: The Evolution of ‘Risk‑Free’ Benchmarks
The how of transitioning to a new or revised benchmark rate will be as critical as defining what the new benchmark should be.
Commentary
Muni Investors: Look for Opportunities Amid Post-Election Policy Shifts
The tax-exempt municipal market has faced some challenges this fall: Yields trended higher in early October as the market struggled to digest the largest new issuance period of the year, and the indigestion has only increased following last week’s U.S. election outcome.
Commentary
Leveraging Opportunities in Bank Loans to Enhance Return Potential
With low interest rates across global markets, a number of investors are turning to credit assets to enhance returns.
Commentary
What Do the U.S. Elections Mean for Emerging Markets?
For much of 2016, a unique alignment of push and pull factors has driven strong performance in emerging markets (EM). The election of Republican Donald Trump and Republican majorities in the U.S. Congress on 8 November, however, represents a pivot point.
Commentary
The Victory Few Saw Coming: The Impact of Trump’s Win on Markets
Here’s our view on what a Trump presidency and Republican Congress likely mean for markets over the near, medium and longer terms.
Commentary
Politicians, Bankers and Bears (Oh My!)
A review of the month’s market-moving events across countries and asset classes.
Commentary
Investors: Focus on State Polling as U.S. Election Nears
With less than a week to go until the U.S. presidential election, investor anxiety about next Tuesday’s outcome is running high, as evidenced by the recent move in risk assets.
Commentary
Fed Statement: No Waves, December Hike Still Likely
Last month, when the minutes from the Federal Open Market Committee (FOMC) meeting in September were released, they revealed that the decision not to hike the policy rate was a close call.
Commentary
Dollar Strength: Déjà Vu All Over Again?
Have you ever wondered why global markets have been so calm since the volatile first quarter? Well, the halt in the U.S. dollar’s appreciation played a major role.
Commentary
Trouble with the Curve
A review of the month’s market-moving events across countries and asset classes.
Commentary
The ECB: A Little More Easing Before a Thorny Exit
Ensuring a smooth exit from extraordinary monetary policy will be no enviable task.
Commentary
U.S. Inflation Still on Track to Hit 2%
Today’s CPI release was a bit of a mixed bag, but overall it doesn’t change our view that headline year-over-year inflation should accelerate toward 2.0%–2.5% over the coming year.
Commentary
Active ETFs for Liquidity Management and Capital Preservation
As reform alters the landscape, investors look beyond money market funds.
Commentary
Money Market Reform: DC Plans Adapt to Sweeping Change
The SEC’s sweeping changes will likely make money market funds less risky – but far less attractive – to participants in defined contribution plans.
Commentary
As New SEC Rules Take Effect, It May Be Time to Look "Under the Hood" of Your Money Market Fund.
As new SEC rules take effect, it may be time to look “under the hood” of your money market fund.
Commentary
The Fundamentals of RAE: Pitfalls of the "Alpha Mirage"
With the soaring popularity of smart beta strategies, we see lots of investors flocking to whatever strategies have the best three-, five- and 10-year performance – and performance-chasing may ultimately be value-destroying. Some popular strategies’ historical success is little more than an “alpha mirage,” attributable mainly – and in some cases, entirely – to rising relative valuations. We favor a systematic process that results in dynamic factor exposures while still delivering broadly diversified, economically representative portfolios.
Commentary
What Lies Beneath
In our outlook for the remainder of this year and for 2017, we discuss the likelihood of continued economic expansion while assessing the underlying risks to growth.
Commentary
Rising Leverage in Emerging Asia: Where Is It Headed?
Japan offers lessons for investors worried about rapidly rising debt levels in emerging Asia, especially China.
Commentary
Fed Statement: Let the Dots – and the Dissents – Do the Talking
Going into today’s Federal Open Market Committee (FOMC) meeting, the question was in what way – or ways – the statement and the accompanying Summary of Economic Projections (SEP) would signal the committee’s conviction that it expects to hike rates later this year.
Commentary
The Rising Costs of Capital Preservation
An investment in money market funds since the beginning of 2009 would have decreased purchasing power by more than 14% on a cumulative basis.
Commentary
The New Neutral Yield Curve: A New Framework for the Bank of Japan
The Bank of Japan (BOJ) is at a crossroads. Despite a 3.5-year unprecedented experiment with unconventional policy tools, a war against deflation is still unwon. Meanwhile, the BOJ appears to be aware of its current policy limit or at least admits there are side effects. So what now?
Commentary
A World of Pure Imagination
A review of the month’s market-moving events across countries and asset classes.
Commentary
After Record USDA Projections, Where Are Corn Yields Headed?
Reports of what could be the biggest U.S. corn crop ever have put pressure on prices in recent weeks.
Commentary
Listening for the Market's Bell
The old Wall Street expression is “They don’t ring a bell at the top.” This snarky adage is usually employed by those saddened financial managers who ride a successful investment to a peak and then watch in horror as it reverses course to a level below their cost basis. They lay the blame at the feet of the amorphous market that failed to signal it was time to exit the ride.
Commentary
UK Corporate Bonds: Tailwinds from the BOE
Sterling investment grade corporate bonds have rallied by around 5% more than the equivalent UK gilts since the Brexit vote. While the quick gains may be over, we still see value – thanks to technicals as much as fundamentals.
Commentary
ECB Preview: More Easing Expected In December
We expect the European Central Bank (ECB) to leave policy unchanged at the 8 September Governing Council meeting.
Commentary
Libor Rising and Money Market Reform: Five Key Questions
Anticipation of U.S. money market reform in October has pressured short-term funding rates higher. What are the implications for banks and investors?
Commentary
Disruptive Regulation: A Secular Investment Opportunity
It’s been nearly a decade since the global financial crisis prompted an onslaught of regulations intended to abolish excessive risk-taking and make the financial system safer. Yet the implementation of reforms – and their disruptive effect on financial business models – will peak only over the next few years.
Commentary
Credit Markets Still Supported By Global Trends
Even after this year’s rally, credit remains one of the more appealing sources of income in financial markets.
Commentary
Deceptive Calm: Investing Globally in Stable But Not Secure Markets
As the year progresses, markets are displaying a strange dichotomy. Thirty percent of sovereign debt globally now offers negative yields, suggesting investors are increasingly focused on certainty and capital preservation even as several major central banks seek to stimulate growth and risk-taking.
Commentary
Asia-Pacific: Investment Implications of Our 2016 Secular Outlook
PIMCO’s 2016 Secular Outlook highlights a world that, over the next three to five years, will be stable but not secure.
Commentary
With Decisive Policy, Bank of England Stacks Odds in Its Favour
Look for very easy UK monetary policy to be with us for the cyclical horizon.
Commentary
A Constructive Case for Emerging Markets
Improving fundamentals in emerging markets warrant a more optimistic investment approach.
Commentary
High Yield Municipals Find a Sweet Spot
PIMCO believes the macro environment remains supportive of the municipal asset class. We see a U.S. economy that continues to expand, which is generally good for municipal credit fundamentals. Municipal defaults generally remain low. Historically, high yield municipal default rates have been significantly lower than high yield taxable counterparts. Moving forward, credit selection remains key. We continue to see value in MSA (Master Settlement Agreement) tobacco bonds; we believe risks to most Puerto Rico governmental bonds remain skewed to the downside, but we continue to assess the opportunities in the Territory.
Commentary
Asset Class Valuations: The Perceived Price of Certainty
Comparing P/E ratios across asset classes shows the perceived certainty of U.S. Treasuries coming at an expensive price.
Commentary
Libor: A Small Move Marks a Big Change
New U.S. money market fund rules have been both an albatross for money market investors and a beacon for ultrashort bond funds since they were announced by the SEC two years ago.
Commentary
Targets and Tactics: Overcoming Lower Return Expectations
As consensus grows on the prospect of lower asset class returns, investors are taking a fresh look at the potential consequences and solutions.
Commentary
Catching Up With the Medians
Saving for retirement: How well is the “median” U.S. family doing?
Commentary
The BOJ Hit Its Limit: A Summer Relief for Banks
The message was clear: The Bank of Japan (BOJ) finally admitted that its current policy framework hit the limit. Disappointed? Well, at least the BOJ’s decision on 29 July provides some relief for Japanese banks, insurance companies and pension funds.
Commentary
Detecting a ‘Smart’ Investment Strategy
How to pick smart-beta strategies using methods similar to those for selecting active managers.
Commentary
Losses on Italian Non-Performing Loans: Severity and Solutions
Losses look manageable over time, but a prompt solution now seems likely.
Commentary
King, Keynes and Knight: Insights Into an Uncertain Economy
The concept of “radical uncertainty” helps shed light on macro analysis in a world of insecure stability.
Commentary
Managed Futures and Multi-Strategy Funds: The Search for Diversification
Manager selection is critical: Only a subset delivered when it counted most.
Commentary
Are You Cashing In With ETFs?
How getting active may beat being passive in today’s market environment.
Commentary
National Monetary Policies Often Correlate, Sometimes Coordinate, Rarely Cooperate
International monetary policy cooperation could pose a threat to the credibility and public support.
Commentary
Commodity Investing: A New Take on Equities Versus Futures
A combination of commodity futures and broad stocks seems to provide better return per unit of risk than natural resource equities.
Commentary
Brexit: What’s Next for Markets, the UK and the Global Economy
In the following Q&A, portfolio managers Andrew Balls, Mike Amey, and Philippe Bodereau discuss PIMCO’s outlook for the UK and the European Union amid Brexit, and assess global ramifications.
Commentary
U.S. Real Estate: A Storm Is Brewing
Prices could decline amid volatility, creating opportunities for nimble investors.
Commentary
Eurozone Secular Outlook: Europe’s Fragile Environment Spells Caution for Investors
With our baseline view of 2%–3% nominal growth over the next three to five years, Europe’s economic, fiscal, social and political environment will remain fragile. Investors should be cautious.
Commentary
Come What May
A review of the month’s market-moving events across countries and asset classes.
Commentary
China and the New Global Monetary Order
China’s integration into the world economy began decades ago, but its integration into the global financial system is relatively new.
Commentary
The Global Outlook: Stable But Not Secure
Good investment opportunities remain, but investors must be compensated for growing and heightened uncertainty and risks of policy exhaustion.
Commentary
April Cools
A calmer tone prevailed across markets in April despite major central banks choosing to pause from adding substantial support.
Mixed economic data underscored a tepid fundamental backdrop.
The market rally continued in April, though underlying sentiment may have cooled more than the rally suggested.
Commentary
Canada’s Monetary Policy Stuck Between a Rock and a Hard Place
Understanding a central bank’s reaction function to volatile financial and commodity markets can help investors navigate an uncertain environment.
Commentary
Altitude Adjustment: Investing During a Period of Lower Returns and Higher Volatility
It can be difficult to adjust to the end of a good run. For years following the financial crisis of 2008, investors benefited from a rally in financial markets facilitated in part by expansionary policies of the Federal Reserve and other central banks around the globe.
Commentary
U.S. Housing Shines Bright in Global Economy
Demographics and new housing starts suggest that the U.S. could face a shortage in the near future.
Commentary
Rumpelstiltskin at the Fed
Though it seems incredibly farfetched, a massive Fed gold purchase program could echo a Depression-era effort that effectively boosted the U.S. economy.
Commentary
Corporate Management: Discerning Opportunities and Risks in Asian Credit
The annual movement of wildlife across the Serengeti-Mara ecosystem in Africa is one of the greatest spectacles in the natural world. The horizon fills with wildebeest, zebra, eland and gazelle migrating for fresh grass, tracked by Africa’s great predators.
Commentary
Factor Investing: Good in Theory, Difficult in Practice
Although factor investing can potentially deliver a return above that of the broader equity market, poor implementation can lead to unexpected outcomes.
Commentary
March CPI Report: Valuations Matter
The March report on the U.S. Consumer Price Index didn’t paint the rosy picture some were expecting. Headline CPI year-over-year was 0.9% versus the expected 1% and core CPI ticked lower to 2.2% for the 12 months ended March, down from 2.3% in February. Despite this March surprise, we believe Treasury Inflation-Protected Securities (TIPS) can weather much more before they underperform nominal Treasuries.
Commentary
Spring Awakening
In a volatile market environment, investors may look to cash alternatives in their effort to add stability to portfolios.
Commentary
The Times Are a--Changin'
Dovish comments and actions by central banks, including the Federal Reserve, helped sustain the market’s rally.
Fundamentals still indicated tepid growth even as global risk appetite built further through the course of the month.
March highlighted that shifts in political trends could feature prominently in the remainder of the year.
Commentary
European Bank Regulation: Expect a Shift
Regulatory uncertainty will create opportunities for private capital as banks retrench from some lending markets.
Commentary
Challenges Remain for Asia's Economies
Complicated growth and policy environments in China and Japan create challenges for the region.
Commentary
Harnessing Value in Dislocated Credit
Market volatility, diminishing liquidity and credit imbalances combine to create mispricings and attractive opportunities in leveraged finance.
Commentary
Actively Managing the Evolution in the Insurance Industry
How are insurance companies adapting to low returns, industry consolidation and new regulations?
Commentary
Wages Are Rising: Good News for Workers, the Economy … and the Fed
The recovery from the Great Recession of 2007–2009 has returned to the pattern of past cycles in which labor’s share of national income begins to rise. A challenge the Fed will face as it tries to engineer a “dovish” rate hike cycle is that investors, households and firms tend to associate Fed rate hike cycles with Fed efforts to reduce or limit inflation. But the Fed wants higher inflation from today’s levels, so it will not be inclined to run a hawkish policy that would prevent it. In the Fed’s current model, holding constant expected inflation, the only way to get inflation moving up to its 2% target is for the unemployment rate to be pushed below NAIRU (the non-accelerating inflation rate of unemployment).
Commentary
Arnott on All Asset March 2016
Rob Arnott, head of Research Affiliates, shares his firm’s market insights and allocation strategies for PIMCO All Asset strategies.
Commentary
Passive-Aggressive: Index Funds and Risk in European Bond Benchmarks
In our view, using a bond index fund today exposes portfolios to greater interest rate risk without commensurate compensation in the form of yield.
White Paper
The Best Time to Accumulate Long Credit Bonds May Be Now
by PIMCO, 3/28/16
Waiting until interest rates increase may not be the optimal strategy to acquire long credit bonds for plan sponsors concerned about potentially rising rates. Instead, these plan sponsors should consider buying long credit bonds now, while hedging the associated duration risk until rates rise to more comfortable levels. In doing so, investors could potentially earn an attractive yield on duration-hedged portfolios, realize compelling returns on investment grade fixed income portfolios, simplify the operational process of extending duration when rates do rise and improve credit-spread match relative to liabilities.
Commentary
Calmer C's Ahead?
China, Commodities and Central Banks Dominate the Global Outlook. Read our global economic outlook for the near term and implications for asset classes.
Commentary
An Ugly Deleveraging
For the European Central Bank to orchestrate a beautiful deleveraging, the economy needs the right mix of growth and inflation.
Commentary
Fear…Not?
The fears that had cast a pall over January weighed on the markets in early February as well, but sentiment improved sharply as the month progressed. Encouraging U.S. economic data contributed to an improvement in global risk appetite.
Investors marveled at yet another V-shaped trajectory in the markets in February, but concerns still lingered.
Commentary
Time to Move
PIMCO believes now is the right time for investors to consider a move into higher-quality credit as well as select high yield and bank loan sectors.
Commentary
The Recession of 2020
A U.S. recession this year is much less likely than a recession in, say, 2020.
Commentary
Arnott on All Asset February 2016
Rob Arnott, head of Research Affiliates, and Christopher Brightman, Research Affiliates’ Chief Investment Officer, share their firm’s market insights and allocation strategies for PIMCO All Asset funds.
Commentary
Asia-Pacific: A Broader Investment Landscape in 2016
In the turbulent market environment, five longer-term investment trends stand out for 2016.
It has been a turbulent year for Asia’s financial markets. In the following interview, Eric Mogelof, head of Asia-Pacific at PIMCO, puts events in perspective and discusses investment trends in the region for the year ahead.
Commentary
2016 Outlook: A Slow and Gradual Fed is Nothing for Municipal Investors to Fear
The combination of continued U.S. growth, muted global inflationary pressures and gradual Fed tightening bodes well.
Commentary
Negative Interest Rate Policies May Be Part of the Problem
Investors may see these experimental policy moves as damaging to financial and economic stability.
Commentary
70 Is the New 65: Demographics Still Support 'Lower Rates for Longer'
The so-called demographic cliff remains at least a decade away; meanwhile, global demographics should continue fueling the savings glut.
Commentary
Investing for Retirement: A Focus on Sustaining Income
Longevity protection strategies can simplify retirement planning and may reduce the risk of running out of money in retirement.
Commentary
Monetary Policy Stuck in the Mid?Atlantic
As we look forward to 2016, once again we are faced with the question of whether the Monetary Policy Committee (MPC) at the Bank of England (BOE) will finally raise interest rates, or whether this will prove to be another year where expectations for a move in official rates are to be dashed.
Commentary
Will Lower Interest Rate Volatility Last?
Though volatility has diminished in recent years, U.S. interest rates are unlikely to be structurally less volatile going forward.
Commentary
Policy Support Amid Sluggish Growth: Asia’s Economies in Transition
Policy will be critical over the coming year but options are constrained by excessive debt, domestic politics and potential asset bubbles.
Commentary
Money Market Reform and DC Plans Time Is Almost Up
SEC reforms will make money market funds far less attractive but sponsors have several capital preservation alternatives to consider.
Commentary
Federal Reserve Outlook for 2016
Up until the Federal Reserve’s historic December meeting, when the central bank increased its policy rate for the first time since 2006, investors were fixated upon when the Fed might finally move its policy rate up from the range of 0%–0.25%. The Fed set the rate at the zero bound in 2008 to combat a plunge in economic growth and to fight disinflationary pressures tied to the debt deleveraging process.
Commentary
The Sea Change in Repos, Swap Spreads and Dealer Balance Sheets: How Active Management May Benefit
Since the financial crisis in 2008, global regulators have been working hard to strengthen the banking system and forestall a similar calamity. A torrent of new regulatory requirements for financial institutions, for instance, aims to create global minimum requirements for liquidity and capital, increase transparency and decrease systemic leverage. The transactional intermediation that occurs between borrowers and lenders without governmental oversight – a vital piece of the world’s financial and funding mechanisms – has come under particular scrutiny.
Commentary
Arnott on All Asset December 2015
Rob Arnott, head of Research Affiliates, and Jason Hsu, Research Affiliates’ co-founder and vice chairman, share their firm’s market insights and allocation strategies for PIMCO All Asset funds.
Commentary
Rising Rates: Dispelling the Myth
Bond investors may have little to fear and potentially something to gain from rising interest rates.
Commentary
High Yield, High Opportunity
Valuations have improved and growth should keep defaults low outside of the energy and commodities sectors.
Commentary
Plodding Along? A Discussion of Today’s Global Economy
This year has seen the global economy continue along a path of modest overall trend growth, but the path has been anything but clear, due to the complexities of oil prices, central bank policies and developments in China. In this interview, Richard Clarida, global strategic advisor, and Joachim Fels, global economic advisor, discuss essential questions surrounding the world’s major economies.
Commentary
r*=New Neutral
The Federal Reserve’s baseline view of a rate-hike trajectory is consistent with PIMCO’s New Neutral thesis about the neutral policy rate.
Commentary
Gasoline and Coffee Fuel Our Daily Lives. Can Commodities Also Fuel Our Investment Portfolios?
Commodities are a tangible part of our daily lives. They are the food we eat, the energy that powers our cars and heats our homes, the metals that go into our electrical wiring and our jewelry. Yet investing in commodities can seem elusive.
Commentary
Gasoline and Coffee Fuel Our Daily Lives. Can Commodities Also Fuel Our Investment Portfolios?
Commodities are a tangible part of our daily lives. They are the food we eat, the energy that powers our cars and heats our homes, the metals that go into our electrical wiring and our jewelry. Yet investing in commodities can seem elusive.
Commentary
The End of Fiscal Obstruction
Fiscal policy in the U.S., eurozone and Japan looks set to become (mildly) supportive for growth.
Commentary
Four Strategies for Navigating the Equity Environment Ahead
Recent market turmoil suggests we could be at a turning point for equities. After several years of high returns and low volatility as the market rebounded off the lows of 2009, supported by unprecedented monetary policies, investors are faced with broadly full valuations, global growth that is still uneven and the prospect of rising rates in the U.S. In this environment we suggest four simple approaches that could enhance returns while potentially reducing risk.
Commentary
European Deleveraging Continues: Alternatives Investment Themes for 2016
With European bank deleveraging expected to continue for the foreseeable future, there are several developing opportunities to look to take advantage of.
Commentary
Gaps, Growth and Headwinds
Global growth is uninspiring. The global economy plods along with aggregate GDP growth of around 3 per cent to 3.5 per cent and similar levels of inflation. This has been true for the past several years and many expect it to continue for at least the next couple. This is partly because trend growth rates in major economies appear to have slowed from the pre-crisis pace. But slow growth is not just a supply-side condition.
Commentary
The ECB’s ABS Purchases – Catalyst or Dud?
Given the limited scope and focus of its ABS purchases, the ECB has not yet revived Europe’s lackluster ABS market.
Commentary
A Very British Recovery
The UK appears to be experiencing a typical British recovery, but needs further improvement to tolerate rising interest rates.
Commentary
Money Glut: More to Come, Still Effective
Given global lowflation pressures, the central-bank-fueled money glut is likely to increase further before year-end.
Commentary
A Fragile Transition Supported by (Further) Policy Accommodation
n the following interview, Portfolio Managers Adam Bowe, Isaac Meng and Tadashi Kakuchi discuss conclusions from PIMCO’s quarterly Cyclical Forum, in which the company’s investment professionals debated the outlook for global economies and markets. They share our views on economies and investment implications across the Asia-Pacific region over the next 12 months.
Commentary
Liquid Alternatives: Considerations for Portfolio Implementation
Since the financial crisis, investors have poured nearly half a trillion dollars into liquid alternative strategies – typically mutual funds and ETFs that deploy non-traditional strategies once reserved for large institutional investors.i These vehicles offer the potential for diversification, downside risk mitigation and attractive risk-adjusted returns with the transparency and daily liquidity many investors desire. Liquid alternatives have been a democratizing force for investors, and we believe today’s market environment arguably has only made them more attractive.
Commentary
In 2015, Volatility from a Phantom Rate Hike
Many investors are familiar with the adage, “they don’t ring a bell,” to warn when it is time to get in or out of an investment. Well, sometimes they do, or so the famed scientist Ivan Pavlov would likely contend. The physiologist trained dogs to salivate at the sound of a bell, having conditioned them to associate the bell with the delivery of food. Pavlov discovered that he didn’t actually have to deliver the food to get the canines to salivate in anticipation.
Commentary
The Case for Credit
Three reasons why the outlook for developed credit markets remains constructive.
Commentary
Balancing Risks and Opportunities in the Multi-Speed World
Read our global economic outlook for the near term and implications for asset classes.
Commentary
The Unique Benefits of Mortgage-Backed Securities
MBS have potential to outperform U.S. Treasuries with high liquidity and low correlation to risk assets.
Commentary
Investing for Income: Meeting the Challenges of a Low Yield Environment
For many investors, generating a high and sustainable income stream is challenging in the current secular landscape, which PIMCO calls The New Neutral. Over the next three to five years, we expect to see global economies converging to modest trend growth rates as central banks are constrained to set policy rates at levels well below those that prevailed before the financial crisis.
Commentary
Navigating Divergent Global ILB Markets: Why Are UK Index-Linked Gilts Persistently Overvalued?
Current extremely low and negative real yields on UK index-linked gilts, particularly for long-dated bonds, do not appear to have any fundamental justifications.
Commentary
Equities: Enhancing Your Small Cap Allocation
Our New Neutral outlook is generally supportive of equities: Low discount rates, recovering but muted inflation and a drawn-out business cycle argue for positive equity performance. However, full valuations and uneven growth suggest returns may be significantly lower than long-term averages. This means that capturing equity alpha will be critical for investors to meet their return objectives.
Commentary
Crossover Bonds: Catching the Rising Stars
Many investors seeking yield in the current low interest rate environment are reluctant to take on high risk. Corporate crossover bonds, which straddle the line between the investment grade and high yield bond markets, may offer a solution.
Commentary
Commodities Remain a Valuable Portfolio Allocation
While the last few years of commodity returns are not an aberration, they are also not the norm.
Commentary
The Three Gluts
While the global savings glut is likely the main secular force behind the global environment of low growth, lowflation and low interest rates, both the oil glut and the money glut should help lift demand growth, inflation and thus interest rates from their current depressed levels over the cyclical horizon.
Commentary
The B-Side of Capital Preservation
Vinyl single records have two sides: The A-side is always the well-known hit song by the musician, and the other, called the “B-side,” is often a lesser known (or unknown) work. When it comes to cash management, the hit song on the A-side – “Capital Preservation Is King” – has been played over and over since the financial crisis.
Commentary
Money Market Reform: Reflections on This Critical Inflection Point for Cash Liquidity Investing
On July 23 2014, the Securities and Exchange Commission (SEC) formally approved additional reforms for money market funds. These changes will directly impact institutional investors and definitively alter the dynamics of liquidity markets.
Commentary
The BOJ’s Policy: What’s Next, More Easing? Or Something Else?
Investors are now debating what the next step will be for the Bank of Japan. It is a dramatic turn, isn’t it? Earlier this year, the consensus view was that the BOJ would move forward with additional easing – the question was ‘when’, not ‘if’.
Commentary
Bond Market Liquidity: Don’t Confuse Investment Risk With Systemic Risk
It is not surprising that the subject of bond market liquidity has come under increasing focus among regulators, investors and the media. While banks are now better capitalized, the combination of post-crisis capital and liquidity regulations and a lower return environment has made them less able and less inclined to function as market makers. Although bank-oriented regulation has made the system more resilient and less levered, it has also had the practical effect of reducing liquidity in markets that have historically relied on banks to support trading, such as in the corporate bond market.
Commentary
Secular Outlook: Implications for Asia-Pacific Investors?
We hope you have had the opportunity to review the summary from our secular forum in May: “The New Neutral Revisited,” written by PIMCO’s Group CIO Dan Ivascyn, Global Fixed Income CIO Andrew Balls an?d Global Strategic Advisor Rich Clarida. In this analysis, the authors identify the six key themes that emerged from our discussion, as well as six risks.
Commentary
Volatility as an ‘Opportunity Class’
Is volatility an asset class? It’s a question we often debate, internally and with clients. There’s no simple answer. Either way, though, it’s an academic point that matters less than our belief that volatility is an “opportunity class” – one with a variety of tactical and macro implications.
Commentary
Earning an Illiquidity Premium in Private Credit
With low yields and tight spreads prevalent in traditional liquid fixed income markets, many institutional investors are considering whether higher returns are available by assuming credit risk in private or illiquid form. We believe this type of alternative credit strategy may enhance portfolio returns, but investors should be extremely judicious when giving up liquidity, particularly today.
Commentary
Data Dependence Is Not a Monetary Policy, But Are the Dots?
At its June meeting, the Fed emphasized data dependence in setting monetary policy.
Although a data-dependent Fed is one that appears to retain a great deal of optionality on the timing and pace of future rate moves, data dependence itself is not a monetary policy.
The Fed’s reaction function to evolving data will likely determine the path of policy normalization. The “dot plot” provides some insight, but the dots alone don’t tell us how policy will play out if the macro data evolve differently from the baseline.
Commentary
Outrunning the Bear: Pension Strategy in a Low Return World
Pension investors often seek to meet two conflicting objectives: delivering high absolute returns and managing risk relative to liabilities.
Unfortunately, this approach has not produced the desired result because the strong absolute performance of risk assets has been eclipsed by even-faster growth in liabilities.
With the era of surging liability values most likely behind us, a realistic goal today may be a relative one: outperforming the value of liabilities, by a smaller margin perhaps, but with more diversification and less risk.
Commentary
Inflation Outlook: Approaching Target
Over the next three to five years, PIMCO expects the global economy will continue along a New Neutral path in which major economies tend to drift along at modest growth rates. At our annual Secular Forum last month, our global investment professionals rigorously debated the longer-term, or secular, outlook for the global economy and markets, and the broad conclusions we reached are detailed in “The New Neutral Revisited.”
Commentary
Lies, Damned Lies and Equity Skew?
Equity skew, which at its most basic purports to measure the difference in the value of stock options with different strike prices, is one of the most used (and abused) sentiment measures in the equity options market. While skew measures can occasionally offer valuable information on the flows within equity derivatives, they can also be highly misleading.
Commentary
Picking U.S. Energy, Housing and Other Credit Sectors for the Long Haul
Persistent trends in economies around the world are providing opportunities for focused, long-term investors in the credit markets. Mark Kiesel, Chief Investment Officer Global Credit, discusses promising themes PIMCO sees over the next three to five years, including the U.S. energy revolution, the rising Asian consumer, the ramifications of global banking regulation and latent demand in the U.S. housing market. PIMCO’s global investment professionals gathered in May at our annual Secular Forum to discuss our long-term, or secular, views of economies and markets around the world.
Commentary
Is the European Insurance Sector in a State of Emergency?
Europe’s insurance industry has responded to profound challenges with a high degree of agility and innovation on both sides of their balance sheets.
Commentary
U.S. Stands Out Amid Global Sluggishness
A year ago, PIMCO said the world was in The New Neutral, as the path to recovery dragged on years after the financial crisis. Last month, at our annual Secular Forum in which our global investment professionals gathered to discuss our long-term outlook, we affirmed that thesis, and we recently published “The New Neutral Revisited” detailing and updating our views. Scott Mather, Chief Investment Officer U.S. Core Strategies, discusses how the outlook for the U.S. differs, to a degree, from other large economies.
Commentary
The Affordable Care Act and Low Interest Rates: A One-Two Punch for Health Insurance Portfolios
Two common themes emerged from a recent PIMCO survey of U.S. health insurers: Underwriting performance will be a larger factor in asset allocation, and there will be more emphasis on liquidity and income. For now, health insurers generally expect increased premium volumes and shifts in insured profiles as a result of the Affordable Care Act. Re-examining investment policies and tiering liquid assets can help investment portfolios maintain flexibility while potentially contributing more to the bottom line.
Commentary
Forward Guidance Is Back at the Bank of England
The central bank seeks to reassure markets about its policy intentions and also stabilise gilt yields ahead of an anticipated rate hike in the U.S.
Commentary
Security Selection and Liquidity Management Are Key in the Steadily Growing Credit Market
Over the past several years, two trends have reshaped the market for U.S. investment grade (IG) corporate bonds: a significant increase in the size of the market (both in number of issuers and issues and in aggregate debt outstanding) and a contraction in dealer balance sheets.
Commentary
Align the Design: Considering and Evaluating Target-Date Glide Paths
Few responsibilities are as important to defined contribution (DC) plan sponsors as selecting a default glide path that best maximizes a participant’s odds of retiring on time and with sufficient lifetime income. The goal, put simply, is to maximize asset returns while minimizing volatility relative to the retirement liability – precisely what Objective-Aligned Glide Paths aim to achieve.
Commentary
Monetary Policy at Warp Speed
An imaginative twist on theoretical physics forms the premise of the science fiction series “Star Trek”: An engine called a warp drive enabled the Starship Enterprise to travel faster than the speed of light, going beyond known space to uncharted, exciting new worlds. The confounding detail was managing the sheer power inherent in the warp drive, including its potential to behave in unexpected ways.
Commentary
The Credit Analysis Process: From In-Depth Company Research to Selecting the Right Instrument
Credit can offer a broad range of investment opportunities. But in today’s low yield environment, an active and integrated investment approach is critical.
Commentary
Global Divergence, the Federal Reserve and the Impact on U.S. Insurers
Insurance publication SNL Financial recently sat down with members of PIMCO’s Financial Institutions Group to discuss PIMCO’s latest views on global divergence, the Federal Reserve and the impact on U.S. insurers in their investment portfolio positioning.
Commentary
Pregnant Pause
After re-engaging policy support in February following an 18-month hiatus, the Reserve Bank of Australia (RBA) wrong-footed many in the market by keeping policy on hold in the two subsequent board meetings. So was February's decision a "one-and-done" policy event or the start of a more aggressive easing cycle?
Commentary
Key Themes for Navigating Credit Markets in Alternatives Strategies
Against a backdrop of low volatility and tight spreads, 2014 turned out to be a challenging year for many alternative investors as they watched their trades become crowded, and reverse quickly when expected returns were not realized. One such example was the positioning among investors in advance of the European Central Bank’s (ECB) Asset Quality Review announcement; many had increased their exposure in anticipation of a tightening of European bank-related securities.
Commentary
The Unexpected Ripple Effect of New Bank Capital Requirements
In the aftermath of the 2008 financial crisis, lawmakers and regulators promulgated sweeping regulations that sought to reduce systemic risk and promote market stability.
Commentary
Expect Further Divergence in Emerging Market Economies
Each quarter, PIMCO investment professionals from around the world gather in Newport Beach to discuss the firm’s outlook for the global economy and financial markets. In the following interview, portfolio managers Michael Gomez and Lupin Rahman discuss PIMCO’s cyclical outlook for the emerging markets (EM).
Commentary
An Open Letter to the Eurozone
As it has once again become fashionable to send an open letter to foreign dignitaries, now is certainly a propitious moment to help focus attention upon dissolving a perplexing financial impediment. For while limiting nuclear proliferation and reducing armed conflict are headline grabbers, the more mundane topic of cleansing the channels of global finance is in fact a public policy good that can create a positive social impact in real time. As such, I now respectfully offer my thoughts on ways to enhance the effectiveness of the current policy path.
Commentary
Supply-Side Yellenomics Is (Slowly) Losing Its Grip on Markets
Should investors worry about the possibility that the Federal Reserve might raise interest rates this year? How about the negative economic consequences of the rally in the U.S. dollar? “Hawkish” Fed mistakes?
Commentary
U.S. and Canada: Continued Recovery With Some Potential for Headwinds
?Each quarter, PIMCO investment professionals from around the world gather in Newport Beach to discuss the firm’s outlook for the global economy and financial markets. In the following interview, portfolio managers Ed Devlin and Mike Cudzil discuss PIMCO’s cyclical outlook for Canada and the U.S..
Commentary
Equity Cyclical Outlook: Between Fed lift-off and living in the New Neutral
Virginie Maisonneuve, PIMCO’s CIO Global Equities, and equity macroeconomic analyst Mark Richards provide an update on PIMCO’s views on equity markets.
Commentary
Will the UK Election Derail the Recovery?
While the economic outlook for the UK is not without risk, most notably if there is an extended period of political paralysis, the UK recovery is much better shape than during the last general election in 2010 and should stay its course. We believe the benign inflationary backdrop will aid economic growth that saw GDP gains of 0.6% for the final quarter of 2014. In an environment of subdued underlying inflationary pressures and sterling appreciating relative to its major trading partners, the Bank of England can afford to wait to tighten monetary policy.
Commentary
Duration: To Hedge or Not to Hedge?
Because duration tends to be an important component of the return profile in a bond portfolio, adjusting exposure rather than hedging it away may make sense for many investors. Low duration strategies may provide a level of interest-rate duration that provides a better trade-off between a full market beta (with interest-rate duration) and a fully duration-hedged beta.
Commentary
Corporate Bonds Offer Opportunities in the Slowing Economy
Lack of corporate leveraging and investment among Australian companies may provide a macro headwind to economic growth and, hence, future prospects for equity investors, but from a creditor's perspective, this should keep credit metrics relatively healthy.
PIMCO's bottom-up analysis has helped identify several opportunities, even within the resources sector, where strong balance sheets, competitive industry positions and sound management build a compelling case for credit investors despite the challenging period ahead.
Commentary
Fit & Focused
Many powerful forces are driving markets and asset prices; chief among them are global monetary policy, technicals and fundamentals.
We use rigorous top-down and bottom-up analysis to identify the best sectors and companies around the world.
We see opportunities in the U.S. (cyclical consumer and housing sectors), Europe (equities, bank capital securities, high yield bonds and corporate hybrids), China (property, technology and Macau) and Japan (cyclical industries, exporters and financials).
Commentary
In a Challenging Environment, Policy Easing Sweeps Through Asia
The key change to our cyclical outlook for Asia: We have further downgraded our growth forecast for China to the low-6% range as real borrowing rates remain elevated. In Japan, we expect growth to recover from last year's technical recession, following the delay in the next value-added tax (VAT) hike and the increase in the Bank of Japan's easing program.
Commentary
Can ECB Policy Heal Europe’s Ills?
In this interview, Managing Directors Mike Amey, Andrew Bosomworth and Lorenzo Pagani discuss the conclusions from PIMCO’s quarterly Cyclical Forum in March 2015 and how they influence our European investment strategy. They also delve into the impact of the European Central Bank’s (ECB) balance sheet expansion on growth and inflation and reflect on Europe’s improving economic health.
Commentary
Proposed Changes to U.S. Bankruptcy Code Could Create Opportunities in Distressed Credit
The American Bankruptcy Institute's (ABI) proposals aim to balance the objectives of effective reorganization of debtors and the maximization of asset values for all creditors and stakeholders. The proposals seem to mark an effort to modify the positions of different creditor classes in bankruptcy, a move that could disadvantage both senior and junior creditors depending on the particular case.
Commentary
Riding a Wave of Accommodation
PIMCO’s quarterly Cyclical Forum was held earlier this month to evaluate and assess the state of the global economy, to reach consensus on the near-term macroeconomic outlook, and to explore the tail risks to that outlook.
Commentary
Equities: Enhancing the Core/Satellite Framework
?In a lower-returning environment, investors may need to look beyond traditional active or passive approaches in order to capture equity alpha. The “building blocks” of equity alpha include high active share stock selection, smart beta-based strategies and portable alpha approaches. These complementary sources of alpha can be implemented in an enhanced core/satellite framework to allow investors to pursue the returns needed to meet their objectives.
Commentary
Positioning U.S. Community Bank Investment Portfolios for 2015
When market uncertainty is elevated and bank profitability is an ongoing concern, taking an extreme view toward investing cash or harvesting liquidity is not optimal. Currently, we do not see as much value in interest rate or duration risk for bank portfolios as yields imply a moderate path for future policy rates. We believe there are opportunities for banks to earn income without taking excess interest rate risk or limiting flexibility against the need to fund future opportunities.
Commentary
With the Bank of Canada, Is the Canadian Economy in Good Hands?
A disorderly decline in energy prices could spill over into consumer and business sentiment, which would worsen any drop in Canada's economic output. More rate cuts this year are likely a part of the Bank of Canada's base case scenario. Investors may be able to improve their returns by buying bonds with high-quality credit spreads, including Canadian bank senior debt and Ontario bonds.
Commentary
While the World Is Not Flat, Distributions May Be
?Investors have long relied on the assumption that asset returns are normally distributed with correlations that are slow to change. Based on our analysis, however, we now have flat distributions and correlations that are much less stable; a fat-tailed event to either the left or the right is as likely to occur as a non-event. Active management that recognizes and adapts to these changes will be essential to seeking strong returns in the future.
Commentary
Why the Bond Market Is Yielding Negative and What Negative Yields Mean for You
Negative yields on bonds are no longer unicorns. In Switzerland, Germany, Denmark and several other European countries, government bonds are trading at negative nominal yields. There are four potential reasons that can explain the negative yield conundrum and can also illustrate the trade-offs between different investment strategies.
Commentary
??Why Does the Internet of Things Matter?
The opportunity to gather, process and use data more effectively is potentially worth several trillion dollars across multiple industries over the next decade.
We expect most industries to adopt some form of this technology, with network effects and competitive dynamics leading to almost ubiquitous adoption beyond the current decade.
Commentary
Repression, Compression, Expression
Cumulative financial repression has led to compressed and recently highly correlated yields in most developed countries, while markets have been volatile as investors react and adjust to the new environment. Recent short-term spikes in volatility belie likely damped volatility at these low rates over time, suggesting a potentially attractive opportunity to sell longer-term volatility at current premiums.
Commentary
What Does the Current Low Interest Rate Environment Mean for Agency MBS?
After the agency MBS market in 2014 was dominated by low volatility, limited prepayment risk and strong performance, the strong rally in U.S. Treasuries in January resulted in just the opposite. With the Fed ending net purchases of MBS in October 2014, it seems unlikely for the private investment community to take the Fed’s place in the MBS market at this level of interest rates and spreads. PIMCO expects the environment for MBS in 2015 to be quite the opposite of 2014, resulting in higher volatility, cheaper valuations and more attractive excess return opportunities for the active manager.
Commentary
DC Managed Accounts: Shining a Spotlight on Investment Advice
?Nearly one in three defined contribution (DC) plans offers managed account and automated advice services that attempt to enhance investment outcomes with personalized advice. As the Government Accountability Office has reported, however, plan sponsors often have had limited or insufficient information to evaluate and monitor automated advice engines, despite having fiduciary responsibility over advice provided to participants.
Commentary
Scott Mather Discusses PIMCO’s Total Return Strategy
Bonds have continued to rally so far this year, even as the Federal Reserve contemplates raising interest rates. In the following interview, Scott Mather, CIO U.S. Core Strategies, discusses recent developments in the bond markets, the outlook for the year ahead and the investment implications for PIMCO’s Total Return Strategy. Mather co-manages the strategy with Mark Kiesel, CIO Global Credit, and Mihir Worah, CIO Real Return and Asset Allocation.
Commentary
The International Ramifications of ECB QE
By engaging in quantitative easing, the European Central Bank is pursuing its inflation mandate with a vengeance. Overall, we think the combination of quantitative easing, investment and lower oil prices will help eurozone growth reach approximately 1.3% in 2015. Global central bank balance sheets continue to expand: Although the Federal Reserve stopped purchasing assets in 2014, the Bank of Japan and now the ECB have stepped up buying bonds where the Fed left off.
Commentary
All the Children Are Above Average
Many investment strategies are centered upon discovering a long-term (average) valuation framework to help in asset allocation and security selection. The term surface of various risk parameters often moves in such a manner that the discounted forward value will point toward this long-term average. If a secular shift has taken place - if all the children are above average, so to speak - then maybe the “average” has changed.
Commentary
Commercial Mortgage-Backed Securities: Approaching the Later Innings of a Recovery
With the U.S. recovery as a supportive backdrop, PIMCO expects commercial real estate prices to rise 4%-6% in 2015. Commercial mortgage-backed securities issuance has increased for five years, and projections for 2015 are for growth of 20%-30%, driven largely by an increase in maturing loans on the supply side and the continued search for yield on the demand side. The growth in issuance does not come without concern: CMBS underwriting standards will likely continue to slip.
Commentary
PIMCO Introduces the PIMCO Multi-Strategy Alternative Strategy
by PIMCO, 2/3/15
In a New Neutral environment that anticipates muted returns and heightened volatility, many investors have looked to liquid alternatives in an effort to boost returns and lower overall portfolio risks. Our approach seeks to efficiently combine a range of complementary liquid alternative strategies, offering the potential for diversification and higher return per unit of risk than a single strategy could achieve on its own. This strategy can play a central role in liquid alternatives allocations or be used as a stand-alone complement to traditional stock and bond allocations.
Commentary
PIMCO Extends Its Dividend Suite With Two New Regional Strategies
As is the case with our other dividend strategies, we are unconstrained by benchmarks and focused on generating yield and capital appreciation by finding attractively valued companies that pay appealing dividends today and have an ability and willingness to grow dividends over time.
Commentary
Opportunities and Risks for Investors After the Oil Price Slump?
What we are seeing now is that oil prices, when OPEC refuses to balance the market, test the marginal cost of production, and costs fall. Some of the costs of the largest components of oil projects – high-spec sixth-generation rigs, pressure pumping, seismic, completion – have fallen between 20% and 45% in the space of months as overcapacity became evident and capital expenditure was revised downward.
Commentary
Commodity Outlook 2015: Watching the Supply Response Across Markets?
Today?s low oil prices should allow for supply and demand to come back into alignment by year-end, led by a decline in the U.S. output growth rate and a modest increase in global demand. We expect continued oversupply to weigh on natural gas prices this year, but some semblance of balance may return to this market in 2016. Grain prices may experience pressure in 2015 as low oil prices pass through to corn prices, which may cause producers to switch to higher-priced crops. With production growth likely having peaked, we expect metals prices to stabilize this year.
Commentary
Municipal Market Update: What's Ahead in 2015
Municipal bonds ended 2014 as one of the best-performing asset classes - buoyed by investors’ search for yield in a low interest-rate environment. For 2015, we are positioned cautiously for greater volatility in the fixed income markets. We currently prefer revenue-backed bonds over most general obligation (GO) debt, as these sectors typically benefit from dedicated revenue streams and do not have the pension challenges that many state and local governments face.
Commentary
Time to Get Off the Merry-Go-Round ??
In 2014, many investors de-risked their portfolios by moving into shorter-duration passive approaches but the potential for capital preservation from these strategies may face challenges. Passive benchmarks and strategies with pre-specified, structural interest rate exposure may have little to no flexibility around their positioning and may push investors into the heart of the proverbial storm. Active strategies not constrained by benchmark limitations may be optimal for investors as they can seek to manage exposure to interest rates.
Commentary
Global Equities 2015: Fasten Your Seat Belt for a Multi-Speed World
We sat down recently with Virginie Maisonneuve, PIMCO?s CIO Global Equities, and equity macroeconomic analyst Mark Richards to discuss PIMCO?s global equity outlook for the coming year.
Commentary
U.S. Lodging: The Recovery Checks In for an Extended Stay
Relatively high occupancy levels should drive room rate growth in the hotel sector over the next several years, despite some supply entering the market. We see opportunities in certain segments, such as premium hotels and C-corporations, due to high barriers to entry and pricing power.
Commentary
ECB Review: Blowing on the Embers of a Reflationary Fire
?Not to pursue our mandate would be illegal? is how Mario Draghi ended his last press conference of 2014. Mr. Draghi?s first press conference of 2015 began with the announcement of a quantitative easing (QE) programme that pursues the European Central Bank?s (ECB) inflation mandate with a vengeance. And rightly so, for the disinflationary trends in the eurozone had become all the more precarious as economic output and the price of oil continued to fall.
Commentary
Wait and See at the Bank of England
UK growth looks to be sustainable, with encouraging domestic demand, though we need to see business investment continue to pick up. Although inflation hovering below the 1% lower tolerance band of the Bank of England (BOE) remains a concern, we think it actually gives the central bank welcome breathing room during a period of uncertainty for the global economy. Looking ahead, we see compelling investment value in the intermediate part of the UK yield curve, namely five- to 10-year bonds, as the BOE plays the waiting game.
Commentary
What We Are Hearing From Asia-Pacific Investors: Five Themes for 2015
Amid lower forward-looking returns, investors are focusing on multi-asset solutions, enhanced beta, income and alternatives in Asia-Pacific. PIMCO is prepared to address these themes, drawing upon our time-tested investment process that combines high-level macroeconomic views with thorough on-the-ground research.
Commentary
The Swiss National Bank?s Unpleasant Experience of Sleeping Next to an Elephant
On 15 January 2015, the Governing Board of the Swiss National Bank (SNB) unexpectedly exited its minimum exchange rate regime, which it had adopted back in September 2011 when it was fighting sharp appreciation of the Swiss franc in the midst of the eurozone sovereign debt crisis.
Commentary
Seizing Credit Opportunities When Oil Prices Are Sliding
?We believe we are moving into an extended period of lower oil prices, and we are actively managing our clients? energy exposure with an eye toward benefiting from recent events. Differentiation between the winners and losers across countries, sectors and individual companies is essential. We currently favor subsectors and companies with strong asset quality, high barriers to entry, solid production profiles and strong balance sheets and liquidity profiles.
Commentary
The Long Growth Drag From Financial Market Tinkering?
Central bankers and regulators have greatly underestimated the negative impact their actions may have on the economic ?multiplier.? Over the next two to three years this miscalculation may settle into a permanent drag on global growth. Forget fears of bloated central bank balance sheets and their potentially inflationary effects ? rather than generating credit in the consumer sector, much of that ?liquidity? is being used to meet new capital requirements.
Commentary
Recovery Gaining Momentum?
U.S. growth will remain robust over the cyclical horizon due to increasing consumption driven by the narrowing unemployment gap and increase in disposable incomes. The Canadian recovery should continue, though divergent forces ? including the U.S. recovery and oil price declines ? could have significant implications for the economy. Growth will be muted across Latin America, with some economies benefitting from U.S. growth, and others dragged down by the slowdown in the eurozone and China.