U.S. growth will slow and the risks of a recession climb in 2019 as the near-decade-long economic cycle ages, according to Pacific Investment Management Co.

“The probability of a U.S. recession over the next 12 months has risen to about 30 percent recently and is thus higher than at any point in this nine-year-old expansion,” Pimco economist Joachim Fels and Andrew Balls, global fixed-income chief investment officer, wrote in an outlook released Thursday. “Even so, the models are flashing orange rather than red.”

The note, “Synching Lower,” is based on discussions at a forum this month of economists and portfolio managers to guide investments for the coming six to 12 months. Newport Beach, California-based Pimco manages about $1.7 trillion.

Pimco Chief Investment Officer Dan Ivascyn, in a Bloomberg Radio interview Thursday, warned that next year will be as rocky as this one.

“The last few months have given us a sense of the types of risks that are out there, that both the economy and markets are going to face in 2019,” Ivascyn said. “At a minimum, like we have seen this year, expect ongoing volatility and that’s true across all segments of the financial markets.”

The CIO still sees some attractive opportunities for 2019 in emerging markets even after they have performed well in the last few months. “Along with fear being reduced, spreads have tightened and prices have gone up,” he said. “We continue to be active in emerging markets.”

Among the key calls in the outlook:

  • U.S. growth will slow to less than 2 percent in the second half of 2019, converging downward with other developed nation economies;
  • A pause in Federal Reserve interest rate hikes is likely in the first half of 2019, but tightening will persist as the Fed continues reducing its balance sheet holdings;
  • Investors should stock up on lower-risk, liquid assets to defend against rising volatility and widening credit spreads, saving cash for opportunities ahead.
  • One opportunity is U.K. financials, where values have fallen amid concerns of a chaotic no-deal Brexit from the European Union, which is “a very low probability” U.S. non-agency mortgage-backed securities are a defensive alternative to investment-grade corporate credit;
  • Agency MBS also offer attractive income.

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