Industry Voice: PIMCO's Cyclical Outlook - Inflation Inflection

Economic growth and inflation will likely peak in 2021 and then moderate in 2022 as fiscal and monetary policy support recede.

clock • 1 min read

Over the past few months, economic recoveries have been uneven across regions and sectors. In the case of the US, this has contributed to supply chain bottlenecks and a bump up in inflation. Nonetheless, at PIMCO we continue to view the factors driving the recent price surge as transitory and, as a result, haven't materially changed our broader views on the impact of the pandemic, policy, or economic growth since our March Cyclical Outlook.

So far, the market reaction to these macro developments has been generally muted, and despite higher inflation risks, the yield on the 10-year U.S. Treasury note has declined 25 basis points since mid-March. However, as we discussed at our Cyclical Forum in March, we see risks that greater macro uncertainty and volatility translate into a similar increase in volatility across asset markets. As a result, we believe it makes sense to be patient at a time of more limited high conviction opportunities and generally rich valuations, and to focus on maintaining liquidity and flexibility in our portfolios. If markets overshoot, as they tend to do, we want to have the flexibility to take advantage of these opportunities.

 

 

 

For investment professionals only. PIMCO Europe Ltd (Company No. 2604517) Ltd (Company No. 2604517) and PIMCO Europe Ltd - Italy (Company No. 07533910969) are authorised and regulated by the Financial Conduct Authority (12 Endeavour Square, London E20 1JN) in the UK. PIMCO Europe Ltd services are available only to professional clients as defined in the Financial Conduct Authority's Handbook and are not available to individual investors, who should not rely on this communication.

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