PIMCO: Growth holds, risks widen
The global economy is expected to remain resilient over the next six to 12 months, while inflation continues to moderate. At the same time, risks around this baseline scenario are widening, according to PIMCO’s Tiffany Wilding and Andrew Balls in the firm’s latest outlook, Growth Holds, Risks Widen.
PIMCO argues that economic developments are increasingly being shaped by longer-term trends, including geopolitical fragmentation and technological change. Most major economies have so far absorbed higher energy prices and tariffs better than expected.
Three factors are currently supporting economic resilience: the strong AI investment cycle, the ability of consumers and China to absorb higher costs, and the gradual approach taken by central banks. However, these factors are becoming increasingly interconnected. A slowdown in AI investment, a worsening energy shock or tighter financial conditions could therefore increase downside risks.
For investors, Wilding and Balls see opportunities in bonds. Elevated starting yields may provide attractive income and help mitigate downside risks across different economic scenarios, while global diversification could strengthen portfolio resilience.
Within credit markets, particularly AI-related investments, the asset manager advocates a selective approach, with sufficient compensation for regulatory, legal and political risks.
