(AOF) – “Pause or pivot, look at bonds”. In presenting its outlook for asset allocation for the next 6 to 12 months, released earlier this week, Pimco believes that the US Federal Reserve “should pause at the top of its interest rate cycle rather than moving quickly towards rate cuts”. Either way, he points out, Pimco will favor bonds for “their diversification, capital preservation and upside opportunities”.
“Starting yields look competitive and we favor high-quality duration and liquid credit exposures, as well as US agency mortgage-backed securities,” added the manager.
For him, “the overall resilience seen in equity markets in 2023 would fade in the event of a downturn” because “earnings expectations seem too high and valuations too high”.
Within multi-asset portfolios, however, he sees “attractive opportunities in emerging Asian markets, particularly in regions that stand to benefit from economic growth in China.”