PIMCO: 5 key policy areas will test markets over the next 5 years

In their latest global economic and market outlook, Pimco analysts detail the ways in which trade, geopolitics, and monetary, fiscal, and exchange rate policy will test the markets over the next three to five years.

Pimco analysts Richard Clarida, Andrew Balls, and Daniel Ivascyn cite “insecure stability” as a key factor that will affect policy decisions around the world.

“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,” write the Pimco Analysts, “and that any pivot to fiscal policy that materializes will be unlikely by itself to boost global growth prospects in a sustainable way.”

They believe that any policy shifts will “coincide and collide” with the risk of recession, which they estimate to be around 70% over the next 5 years.

Below are the slides from their presentation to clients. 

Evolution of PIMCO’s secular views

How have the risks we saw in May 2016 changed? Our standard 2016 forum slide with today’s Big Questions

Consensus sees a modest upswing in global growth to the Great Moderation trend of 3.7%

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