PIMCO: Compounding opportunity

14 januari 2026

Vooruitzichten

Tiffany Wilding, Economist, and Andrew Balls, CIO Global Fixed Income, write:

“The Trump administration’s sweeping tax, trade, and immigration policy overhauls – including quadrupling the effective U.S. tariff rate – were widely expected to stifle global growth, trade and investment. In response, various DM and EM governments announced preemptive yet targeted fiscal measures to buffer the economic transitions, while central banks focused on downside risks. It turns out that economic growth has been surprisingly resilient as these policy trends intersected with a new general-purpose technology: AI.”

Main points from the outlook:

Growth remains surprisingly resilient - After global growth withstood tariff pressures in 2025, the near-term outlook appears stronger, aided by AI‑related capital spending and efficiency gains. Lower Chinese export prices have helped ease the shift in trade flows away from the U.S.
Global diversification to mitigate risks - Diverse economic and policy conditions across countries present investment opportunities in both developed markets (DM) and emerging markets (EM). Notably, several large EM economies offer significant real yield premiums over DM bonds – compensation for risks that are increasingly idiosyncratic and diversifiable rather than systemic. EM local currency bonds delivered strong returns in 2025 while providing crucial portfolio diversification at a time when DM correlations remain elevated.
Global monetary and fiscal policies are moving in different directions - The U.K. and several emerging market (EM) economies with high real rates and limited fiscal space are likely to ease monetary policy more than the European Central Bank or Bank of Canada, where policy is already neutral. Fiscal policy is set to become more influential in China amid trade pressures, and in the U.S. where tax cuts will likely boost households and businesses.
Take advantage of the fixed income opportunity - Bonds are cheap versus stocks at current valuations. After a sharp post-pandemic repricing, starting yields on high quality bonds remain attractive, highlighting the sustainable return potential in fixed income. Investors today have a rare opportunity to increase quality, liquidity, and portfolio diversification without giving up equity-like return potential.
Credit: constructive but selective - We look to avoid lower-quality deals with less-attractive spreads, weak collateral, and fewer lender protections. We expect secured lending in areas such as asset-based finance, real estate credit, and well-structured infrastructure debt to outperform. Lower-quality segments of corporate markets are more likely to disappoint given tight spreads, weak underwriting, and broader signs of overall complacency.