Are we in a goldilocks economy3/6/2023 ![]() ![]() Ivascyn, Group Chief Investment Officerĭan Ivascyn: Sure. Tina Adatia: Dan, can you give us your high level view on how PIMCO is thinking about portfolio positioning, given today's variability and what we're seeing in terms of the uncertainty and the level of volatility? So again, this increases the risk of not only a sharp slowdown in growth, but it also means that the risk of a recession over our cyclical horizon has increased. This is very different, particularly for monetary policy, because inflation is so much higher and central banks are really laser focused on fighting inflation rather than supporting growth. This shock creates a lot of winners and losers, winners both in emerging markets and also in developed markets, mainly the commodity producers, but again a lot of losers, particularly those that are net importers of raw materials, including food.Īnd then the third conclusion is that monetary and fiscal policy are unlikely to ride to the rescue this time as they did during the pandemic And as they did in the great financial crisis. Higher energy prices affect Europe much more than the US and some other parts of the world. The second conclusion is that this is not only a stagflationary shock. And the reason is really this stagflationary shock emanating from Russia's invasion in Ukraine and from the sanctions that followed it. We are now in anti-Goldilocks, which means we're in a situation where the economy is both too hot in terms of inflation, but also too cold, or will be too cold, in terms of growth. It was just right, which was a great environment for financial markets.įULL PAGE BULLETED LIST: TITLE – PIMCO’s Cyclical Outlook: LIST – Inflation is too hot, growth is too cold, Stagflationary and asymmetric shock, Monetary and fiscal policy rescue unlikely Goldilocks was an environment where the economy was neither too hot nor too cold. So first of all, I think we are facing the exact opposite of the Goldilocks environment that we all got used to before the pandemic. Joachim Fels: Yeah, well, Tina, I'll focus on the three main conclusions. Text on screen: Joachim Fels, Global Economic Advisor Tina Adatia: Joachim, can you explain what we mean by Goldilocks and anti-Goldilocks scenarios in the context of the global economy and give us an overview of the main conclusions from our outlook? Text on screen: Tina Adatia, Fixed Income Strategist ![]() This is not an offer to any person in any jurisdiction where unlawful or unauthorized. Footer Overlay: PIMCO provides services only to qualified institutions, financial intermediaries and institutional investors. ![]()
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