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Putting Markets in Perspective


We believe the global economy is about to enter a low-growth "window of weakness."

Economy

PIMCO’s outlook for major economies over the next six to twelve months

  • Global

    Outlook

    The global economy is facing a “window of weakness.”

    Implications

    Given heightened uncertainty in the face of low global growth, both economies and markets could be susceptible to shocks; therefore, investors should focus on resiliency and diversification.

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  • U.S.

    Outlook

    In the U.S., we see a period of slower growth and increased vulnerability.

    Implications

    Low growth and increasing vulnerability means that investors should focus on diversification to seek resiliency and enhancing flexibility.

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  • Europe

    Outlook

    Trade tensions are weighing on growth, but the European Central Bank has re-engaged.

    Implications

    While the outlook is more fragile, there are relative-value opportunities in the eurozone for active investors.

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  • Emerging Markets

    Outlook

    We forecast real GDP growth in the 4.5% to 5.5% range for emerging markets (EM).

    Implications

    The long-term value of EM assets remains compelling, especially relative to the low (and even negative) yields embedded in developed-market assets.

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Financial Markets

PIMCO’s outlook for key economies and markets and opportunities for investors to consider.

  • Fixed Income

    Outlook

    The current market backdrop warrants the need for diversification.

    Implications

    We recommend partnering with an active manager with the resources and capabilities to find opportunities across the fixed income universe.

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  • Equities

    Outlook

    September’s style rotation reinforced the need for diversification in equities.

    Implications

    Re-balance your asset allocation if you’re overweight growth stocks, and consider value stocks, as they can potentially serve as important diversifiers and sources of excess returns given attractive valuations.

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  • Short-term

    Outlook

    Short-term bonds can help reduce portfolio volatility without giving up attractive returns.

    Implications

    Be prepared for deteriorating liquidity in the funding markets, and seek out actively managed short-term strategies that pursue higher yields and have the potential for capital appreciation.

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  • Credit

    Outlook

    Leverage in the credit sector has increased, but pockets of opportunity remain for active managers.

    Implications

    Avoid passive strategies that are structurally biased toward industries with higher levels of debt, choose a flexible multisector approach that seeks to capitalize on structural credit market inefficiencies, and select a strategy that can combine different asset classes dynamically.

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  • Commodities

    Outlook

    Geopolitical uncertainty suggests commodities have a place in portfolios.

    Implications

    Commodities have the potential to offer portfolio diversification, given elevated geopolitical risks in the oil market.

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