In its latest quarterly outlook, PIMCO evaluated the possibilities for the global economy and financial markets with a decidedly bearish tone. Senior portfolio manager Saumil Parikh, a managing director, generalist portfolio manager and member of PIMCO’s Investment Committee, spoke about what the company sees ahead in an opinion piece.
The company has devised an investment strategy for the next three to five years that it terms the “New Normal,” which shows global aggregate demand falls short of global aggregate supply—partly because globalization has risen so rapidly.
Developed economies and emerging economies will diverge greatly during this period, thanks to the myriad problems facing developed countries that include debt and deregulation. Emerging nations have healthier economies and a greater potential for a boost in consumption than austerity-ridden economies in the euro zone and beyond.
Because of debt deleveraging in Europe and the debt ceiling woes of the U.S., as well as inflation in Asia and Latin America, PIMCO sees global growth as “very modest,” only 1-1.5% after inflation for the next 12-18 months. Estimates for 2011 were 2.7-3%, and for 2010 had been 4.1%.