Pimco Chief Investment Officer: Prepare for a “hard landing” in the global economy
Daniel Ivascyn, chief investment officer at Pacific Investment Management Co. , said in an interview that he is putting in “hard money” compared to other investors as central bankers prepare to continue raising interest rates. Landing” preparations.
“The more incentive there is to tighten policy, the greater the uncertainty around these lags and the greater the risk of a more extreme economic outlook,” Ivascyn said.
He added that in the past, when rates rose, the impact needed to be felt with a lag of five to six quarters, which was “the norm”. He also believes that the market may still be overconfident in the quality of the central bank’s decision-making and its ability to produce positive results.
While Pimco believes a “soft landing” for the U.S. economy is most likely, the world’s largest manager of active bond funds is avoiding those sectors of the market that are most vulnerable to a recession, Ivascyn said.
The company, owned by Germany’s Allianz SE, favors high-quality government and corporate bonds for now. The company is awaiting a downgrade of the company’s credit rating, which Ivascyn said would prompt forced sales of instruments such as collateralized loan obligations in the coming months and years. That would be the time to snap up bargains, he said.
Ivascyn cautions that this cycle may not be the same as previous ones. Central banks may be less willing to provide support amid fears it could fuel price increases, a situation that would slow the deterioration in credit valuations but not stop it, with so much risk already being transferred to private markets, he said.