PIMCO cyclical outlook: Bounded optimism on the global economy

In Cyclical Outlook: Bounded Optimism on the Global Economy, authors Joachim Fels, PIMCO global economic advisor, and Andrew Balls, PIMCO CIO of global fixed income, write, “Vaccinations and fiscal support should lift the global economy in 2021, but several risks call for careful portfolio positioning.”

Global output and demand are likely to rebound strongly in 2021, driven by the rollout of vaccines and continued fiscal and monetary policy support. Inflation should creep up only moderately in 2021. Central banks’ policy rates are likely to remain low, and asset purchases will likely continue.

Key risks to the cyclical outlook, according to the report, include fiscal fatigue (in which governments return to a more cautious stance), a negative credit impulse in China and pandemic-related economic scarring.

While equity and credit markets seem to have priced in a return to normality, PIMCO sees opportunities in non-agency mortgages and other structu