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.
The lack of market reaction suggests that many investors are not convinced that the Fed’s new guidance represents any material shift in policy.
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.
While a near-term mechanical bounce in economic activity in response to the lifting or easing of lockdown measures looks likely, we expect the subsequent climb up to be long and arduous.
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.
Our baseline economic forecast is a U-shaped global recovery, but substantial unknowns remain.
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.
Global growth could follow a U-shaped path over the next few quarters, though substantial uncertainty remains as policymakers grapple with the impact of the coronavirus.
Three key themes from our latest Cyclical Outlook will likely drive the global economy and central bank policy in the year ahead.
This time, it’s the riskier segments of the corporate credit market – not housing – that could trigger the next downturn.
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.
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.
The institutional “golden fetters” of the interwar period have been replaced by fundamental “global fetters” that severely constrain monetary policy.
It is no longer absurd to think that the nominal yield on U.S. Treasury securities could go negative.
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.
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.
We believe short-term interest rates in the U.S. are now anchored in The New Neutral, as global growth keeps synching lower.
Five key macro debates are likely to shape the economic and market outlook for 2019.
We see a synchronized global slowdown in 2019. We position cautiously but anticipate opportunities ahead.
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.
We see growth slowing, but not an imminent recession. We invest accordingly.
Art may now be making a comeback in monetary policy, and partly at the expense of science.
The U.S. central bank is damned either way as it faces a choice on a September rate rise.
For microeconomic advances to unleash a productivity rebound economywide, the macroeconomics must cooperate.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
We see three risks to the outlook for steady economic growth. Yet we also see opportunities for investors to target above-benchmark returns while emphasizing defense at a time of low volatility and full valuations.
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.
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.
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.
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.
A bottom-up look at major industries around the world reveals significant potential for productivity growth.
Don’t get too excited about the recent rise of headline U.S. inflation above the Fed’s target.
We are now more confident in our baseline view that the global economic expansion will be strengthening and broadening over our cyclical horizon.
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.
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.
President Donald Trump’s promise to put America first might actually help make Europe great again.
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.
We assess three global economic scenarios for 2017.
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.
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.
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.