Pimco: Bonds return as a profitable tool

High and persistent inflation, high interest rates and geopolitical tensions that show no signs of abating. Expert opinion of this management company recommends flexibility and caution.

You are Investors They won’t be able to sleep peacefully, at least for now. You are markets remain volatile, with a series of factors that are still champions. The constant inflationYou are Aggressive central banks and the The possibility of a deep recession🇧🇷 But one thing stands out: Bond return as a profitable tool for investors. Specialists in pimcowho recently submitted their periodical review to the specialized press, are convinced of this.

Uncertainty on both sides of the Atlantic

Uncertainty, as mentioned earlier, is the key word to explain the last quarter of 2022. Both in Europe and the United States. Konstantin Fitdirector of European portfolios at PIMCO, explains that they expect in their own base case Shallow stagnation in developed markets🇧🇷 especially in 🇧 Euro-zone Nor United kingdom, who deal with the turmoil after the Ukraine war. They also consider it likely to be a file Real GDP of the United States modestly decreases.

However, according to PIMCO experts, there are still two types of data to monitor: High unemployment rates and the Inflation remains above target🇧🇷 It was this mix that put central banks in a difficult position. However, in general, their actions so far indicate that the central enterprises are complete Focus on fighting inflation🇧🇷 In the US, for example, we expect the Federal Reserve Raising benchmark interest rates to a range of 4.5% to 5% Before stopping to evaluate The effects of hardening the economy“, Says Tiffany Wildinga North American economist at PIMCO.

return commitments

As mentioned at the beginning, this could be the time to Bond Investments🇧🇷 “We think today we can expect High quality bond markets Show Revenues In line with long-term averages. We also see that the short portion of the yield curves, in most markets, is already lowering monetary tightening sufficiently,” he comments. Andrew Bowlesdirector of Global Bond Investments at PIMCO.

Among the investment opportunities that PIMCO experts recommend is to combine Exposure to high quality reference yields – which has grown significantly over the past year – with Selective exposure to high quality diffusion segmentswith the Addition of alpha potential for active management🇧🇷 “We think that 🇧 profitability potential Convincing given the cyclical outlook and that many investors could be rewarded for reinvesting in bonds.

Not only that, during the analysis of experts confirm that More normal negative correlations between the high quality bonds and the Procedures It may reappear, enhancing the hedging properties of underlying quality bonds, which are generally expected to rise when stocks fall. Additionally, the higher yields offered in bond markets today can help reward those who choose to wait through this period of uncertainty and the potential for increased volatility.

Patience rewards the investor

However, PIMCO experts agree on one thing: caution is required. “If inflation is more severe than we expect, central banks may have to To raise prices More than what the market is currently discounting. if it was slack periods As shallow as we expect, it will take time to make rate cuts that stimulate growth, given the high core inflation,” they comment.

Therefore, Balls repeats it in Core Bond Portfolios This is the context in which we are prepared to make an active and deliberate decision Reducing risk across a range of risk factors and conserve ammunition (ie Maintaining liquidity🇧🇷 Liquidity management is always important, but it is especially important in Challenging market conditions and extreme uncertainty🇧🇷 “In line with our long-term views, we aim to maintain portfolios that are resistant to a combination of economic, geopolitical and market outcomes,” he says.

In conclusion, according to experts, the best opportunities will come for investors who are able to hold positions patiently and have liquidity. ‘The gap between public markets And the Special Regarding asset valuation Still extreme, but with private markets adapting and difficulties in Corporate and real estate credit Become clear, opportunities should arise likely to generate high returns🇧🇷 They concluded that this is one of our strongest opinions.”