PIMCO's 5 significant pivots, & says US recession chance now 70% within 5 years

PIMCO"s latest "Secular Outlook" was released overnight

It"s a report on the firm"s views developed through the "Secular Forum" held on May 8-10

In very brief:

• The firm is assessing the chance of a US recession in the next 5 years at 70%


• Investors should gather cash for that - when stocks and bonds will be cheaper


• And ... "Investors should use cyclical rallies to build cash to deploy when markets correct and risks are re-priced"


• "In contrast to prior downturns, there"s not a lot of tools in the policy tool-kit" ...  said potential lack monetary policy options is like "driving-without-a-spare-tire"


• "People need to remember that in 2001, the Fed cut interest rates by five percentage points. In the next recession, the Fed is not going to have room to cut the interest rate by five percentage points"


• Firm predicts  President Trump"s proposed tax package will pass, but will be "light on reform", ore about tax cuts

More:

• Italy to remain in the euro zone


• Forecasts 2 % growth & 2% inflation for the US


• "All three key risks that we saw on the horizon - elevated and rising debt levels, monetary policy exhaustion and the ascent of populism - have either materialized or become more real" 

The full report is here, including PIMCO"s outline of:

• Over the next five years, the global economy may undergo five significant pivots in the direction and scope of monetary, fiscal, trade, geopolitical and exchange rate policies. But while the direction of some of these policy pivots may be known, the path that policies actually take, their impact on the global economy and markets, and their ultimate destination are today all highly uncertain. That said, over our five-year secular horizon we believe that the global economy will be "driving without a spare tire" as the Fed raises rates and shrinks its balance sheet, and that any pivot to fiscal policy that materializes will be unlikely by itself to boost global growth prospects in a sustainable way.
  

PIMCO"s 5 significant pivots, & says US recession chance now 70% within 5 years
PIMCO"s 5 significant pivots, & says US recession chance now 70% within 5 years
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