PIMCO’s Intermediate Stock Market and Economic Outlook

Every year PIMCO conducts what it calls a Secular Forum at which the firm’s staff plus invited outside speakers discuss broad economic and investment issues. At the end, PIMCO derives an outlook for the next three to five years and uses this outlook to influence investment decisions. The 2017 forum concluded a few weeks ago, and PIMCO’s leaders issued this summary of the conclusions and the inputs that led to them. Even if the outlook isn’t the smae as yours, reading the summary shows how quality investors approach investing and make decisions.

Global markets over the next five years face the potential of significant pivots in the direction and scale of monetary, fiscal, trade, geopolitical and exchange rate policies.

The challenge for investors is that while the direction of these five types of policy pivots may in many cases be known (in the U.S., more fiscal stimulus and less monetary accommodation), the path that policies actually take, their impact on the global economy and markets, and their ultimate destination are today all highly uncertain. An intention to change the direction of policy does not guarantee its success, a plan to implement policy does not define its path, and the market reaction may change the policy’s ultimate destination. For this reason, investors need to identify and assess each of these policy pivots, invest in markets that will benefit from policies that succeed, and guard against policies that are likely to fail.