The latest PIMCO Cyclical Outlook offers a strategic analysis of global economic conditions and investment opportunities as markets navigate heightened policy uncertainty and elevated equity valuations. Key takeaways include:
• Economic Outlook: U.S. protectionist policies increase uncertainty; growth prospects in developed markets (DM) remain moderate, while China's growth slows amid structural challenges. Inflation in DMs is expected to converge toward targets.
• Investment Strategy: Bonds are favored for their attractive yields and diversification benefits, especially in DM fixed income, agency mortgage-backed securities, and select emerging markets.
• Risks: Elevated equity valuations and potential trade policy shifts pose downside risks to growth.
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