PIMCO: Here are 3 difficult transitions the world will undergo in 2017

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Thomson Reuters

Pimco has offered its outlook for 2017 in an environment of political and market uncertainty across the globe.

In “Cyclical Outlook: Into the Unknown,” Joachim Fels and Andrew Balls identified “three difficult transitions” the world will undergo – namely a shift from monetary to fiscal policy, a shift from globalization to deglobalization, and a currency regime transition in China – and offered their outlook.

“Who would have thought back in May that within the following six months the UK would vote for Brexit, Donald Trump would be elected president of the United States, Italy would vote ‘no’ on reform, and that markets would like it?” the duo wrote as backdrop to their 2017 outlook. “Rather than betting big on one direction or the other, investors today should consider a patient approach and aim for capital preservation until the veil of uncertainty over future policies starts to lift,” they said.

Below are the slides from their presentation to clients.


Postelection, markets have responded with surprising euphoria.

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PIMCO

The global economy is set to grow in 2017 at the same 2.5% to 3% range of the past five years.

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PIMCO

There are three difficult transitions the global economy must face in the coming year.

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PIMCO

“Trumponomics” carries both left- and right-tail risks.

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PIMCO

The possibility of more populist backlash is very real.

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PIMCO

Federal Reserve rate hikes in 2017 could exceed market expectations.

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PIMCO

The European Central Bank’s inflation target may be unachievable.

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PIMCO

The Bank of Japan shifts policy to target the yield curve rather than the money supply.

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PIMCO

Peripheral spreads in Europe could widen because of political uncertainty and the ECB.

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PIMCO

The market’s inflation expectations may finally be rising.

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PIMCO