PIMCO "Now is the time for defense... Must wait for market correction"

PIMCO Forecasts Global Economic Hard Landing
Restructuring Portfolio Focused on Corporate and Government Bonds
Accumulating Cash and Emphasizing Defensive Investments

"We need to restructure investment strategies in a more defensive manner to prepare for the possibility of a hard landing of the global economy."

PIMCO, the world's largest bond manager, advised this, stating that it will be difficult to avoid a recession as central banks continue tightening monetary policy.

[Image source=Reuters Yonhap News]

On the 2nd (local time), Daniel Iverson, Chief Investment Officer (CIO) of PIMCO, pointed out, "The market is hoping that central banks can continue tightening while avoiding a recession." He added, "The stronger the demand to continue tightening, the greater the economic uncertainty becomes," expressing concern that "the risk of the economy moving in an extreme direction could also increase." PIMCO manages assets worth $1.8 trillion (approximately 2,374 trillion KRW), making it the world's largest bond manager.

He also criticized the market for overestimating the central banks' ability to manage monetary policy. Iverson said, "There is excessive expectation that central banks will make excellent decisions and produce positive market outcomes," and "There is an optimistic belief that the benchmark interest rate can be controlled like a (bond) yield curve."

Iverson also forecasted that central banks will continue tightening for the time being. He cited the fact that core inflation in the U.S. and Eurozone still exceeds the monetary authorities' target of 2% by more than double, despite repeated rate hikes. He observed, "As long as inflation comfortably exceeds 2%, it seems difficult for central banks to stop tightening even if the economy worsens."

Iverson suggested that investors should adopt a defensive investment approach to prepare for a hard landing of the global economy. PIMCO, having recovered from a loss of 75 billion euros (approximately 107 trillion KRW) last year, has restructured its investment portfolio this year to focus on defensive and liquid products such as safe corporate bonds and government bonds.

[Image source=Yonhap News]

He also emphasized that now is not the time to actively enter the market but to accumulate cash. He explained that the number of companies experiencing credit rating downgrades due to recession will increase within a few years, and that investors should actively invest at that time. According to a recent survey conducted by Bank of America (BoA) targeting fund managers, the proportion of investors increasing safe investment-grade bonds compared to speculative-grade high-yield bonds was the highest since 2008.

Iverson said, "I believe a soft landing is the best future for the U.S. economy, but currently, we are avoiding investments in the most vulnerable sectors during a recession," and added, "Many investors will wait for market adjustments over the next 2 to 3 years to seek high bond yields," emphasizing, "I recommend holding cash for that time."

This content was produced with the assistance of AI translation services.