Economic and Market Commentary

Preparing Portfolios for 2023: Consider the Strong Case for Bonds

At the tail end of a challenging year, we reflect on the evolving macroeconomic landscape, including potentially stabilizing inflation, and the opportunities investors may do well to consider in 2023. Learn more from Group CIO Dan Ivascyn.

More from this section

Read Transcript

Text on screen: PIMCO

Text on screen: PIMCO provides services only to qualified institutions and investors. This is not an offer to any person in any jurisdiction where unlawful or unauthorized.

Text on screen: Ken Chambers, Product Strategist

Ken Chambers: To get us started, maybe you could talk a little bit about the macro backdrop. Where do we stand today and how do you and the investment committee view that evolving in calendar year 2023?

Dan Ivascyn: It's been a volatile year, a tough year.

Text on screen: Daniel J. Ivascyn, Group Chief Investment Officer

The good news is that we do believe that we're finally seeing some signs of stabilization in the one area that's caused the most uncertainty this year, and that's inflation.

Text on screen: We believe that inflation comes down in 2023

Images on screen: Gas station pumps, grocery store

Today at PIMCO, we think inflation comes down next year. And I think it's important to talk about now the relationship between inflation and economic growth.

We expect economic growth in the base case to be low, even tip into negative territory next year. The base case is a shallow recession, but what's critically important from a portfolio construction perspective is that anytime you are forecasting a shallow recession, you absolutely need to prepare portfolios for something far worse. The good news today,

Text on screen: Fixed income offers resiliency during an economic slowdown

Images on screen: PIMCO trade floor

is that there are a lot of areas within the fixed income opportunities set that represent resiliency even if you had a more protracted economic slowdown.                                   

Ken Chambers: If you think about you and the investment committee and the different strategies, how are we viewing duration risk within those portfolios today?

Dan Ivascyn: Well, at a high level, there's good value back at bonds as I mentioned, and to even reinforce that further. Even if you are more concerned about inflation, you could buy inflation protected assets and generate an inflation adjusted yield or real yield that again is at levels that we haven't seen in many, many years.

Text on screen: Remaining defensive on interest rate exposure may still generate attractive returns

Images on screen: PIMCO trade floor

So, in a given strategy, you can continue to be a little bit defensive regarding interest rate exposure and still generate those attractive returns.                                 

So, at the moment across PIMCO portfolios, we're more neutral towards duration, even across some portfolios a little bit defensive.

We have been more involved in the TIPS market over the course of the last few months. Because even if we're wrong, if the markets are wrong, wrong and inflation remains elevated, that's an  asset that will reduce overall volatility in that environment.

Ken Chambers: What are our thoughts and views on non-US markets?

And what about the dollar views on other major currencies at this time?

Dan Ivascyn: Yeah, the dollar has been incredibly strong for a long time. And based on that strength, when you look at other currencies around the globe, they look quite attractive from a long-term valuation perspective.

Images on screen: Brazil, New Zealand, South Africa

We've had some exposure to some of the commodity exporting currencies that's been very, very helpful for strategies within our emerging market area; they've been positive. But we're increasingly looking at increasing slightly some of our non-dollar exposure across the complex based on attractive valuations in some cases, central banks that have been much more active in ahead of the curve relative to the Federal Reserve and other developed country central banks.

Images on screen: Central banks

And the fact that we believe that we're going to see a material slow down in Fed tightening next year, and therefore that very well could be a catalyst finally for non-dollar currencies beginning to outperform.

Ken Chambers: You've talked about flexibility and the need for flexibility in portfolio constructions and different types of mandates. Can you talk a bit about what flexibility looks like in those portfolios today?

Dan Ivascyn: You have a tremendous amount of volatility around the globe.

Text on screen: TITLE – Sources of volatility: BULLETS – Less synchronized business cycle, Ukraine/Russia war, COVID policy uncertainty in China, Inflation                       

Less synchronized business cycles, war in Europe, policy uncertainty in COVID in China, despite the fact we've mostly declared victory on COVID here, they're dealing with COVID and they're at a very different point of their economic cycle. Lots of variability in terms of inflation around the globe. This is a great environment to have a global opportunity set, a great environment to have significant flexibility.            

So, we do think in the context of an overall asset allocation, clients should think about being as flexible as they can, either giving up some liquidity to take advantage of longer-term opportunities, or be willing to escape the so-called home bias, expand into new areas.

Text on screen: We believe flexibility is key to maximizing returns in a 3-5 year outlook

Images on screen: PIMCO trade floor

We do think that will likely be the optimal way of maximizing return, especially if you have a three-year, four-year, five-year type outlook.

We still live in an uncertain world. So don't be overly aggressive. Respect the fact that we're in a highly uncertain environment, have more of a defensive mindset, but also get back into markets if you left.

And there are plenty of scenarios that can lead to a powerful rally that clients may not want to miss.         

Text on screen: For more insights and information, visit pimco.com

Text on screen: PIMCO

Disclosure


All investments contain risk and may lose value. Investing in the bond market is subject to risks, including market, interest rate, issuer, credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and low interest rate environments increase this risk. Reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed. Commodities contain heightened risk including market, political, regulatory, and natural conditions, and may not be appropriate for all investors. Inflation-linked bonds (ILBs) issued by a government are fixed-income securities whose principal value is periodically adjusted according to the rate of inflation; ILBs decline in value when real interest rates rise. Treasury Inflation-Protected Securities (TIPS) are ILBs issued by the U.S. government. Diversification does not ensure against loss.

Currency rates may fluctuate significantly over short periods of time and may reduce the returns of a portfolio.

This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

PIMCO as a general matter provides services to qualified institutions, financial intermediaries and institutional investors. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This is not an offer to any person in any jurisdiction where unlawful or unauthorized. | Pacific Investment Management Company LLC, 650 Newport Center Drive, Newport Beach, CA 92660 is regulated by the United States Securities and Exchange Commission.| PIMCO Europe Ltd (Company No. 2604517) is authorised and regulated by the Financial Conduct Authority (12 Endeavour Square, London E20 1JN) in the UK. The services provided by PIMCO Europe Ltd are not available to retail investors, who should not rely on this communication but contact their financial adviser. | PIMCO Europe GmbH (Company No. 192083, Seidlstr. 24-24a, 80335 Munich, Germany), PIMCO Europe GmbH Italian Branch (Company No. 10005170963), PIMCO Europe GmbH Irish Branch  (Company No. 909462), PIMCO Europe GmbH UK Branch (Company No. 2604517) and PIMCO Europe GmbH Spanish Branch (N.I.F. W2765338E) are authorised and regulated by the German Federal Financial Supervisory Authority (BaFin) (Marie- Curie-Str. 24-28, 60439 Frankfurt am Main) in Germany in accordance with Section 15 of the German Securities Institutions Act (WpIG).  The Italian Branch, Irish Branch, UK Branch and Spanish Branch are additionally supervised by: (1) Italian Branch: the Commissione Nazionale per le Società e la Borsa (CONSOB) in accordance with Article 27 of the Italian Consolidated Financial Act; (2) Irish Branch: the Central Bank of Ireland in accordance with Regulation 43 of the European Union (Markets in Financial Instruments) Regulations 2017, as amended; (3) UK Branch: the Financial Conduct Authority; and (4) Spanish Branch: the Comisión Nacional del Mercado de Valores (CNMV) in accordance with obligations stipulated in articles 168 and  203  to 224, as well as obligations contained in Tile V, Section I of the Law on the Securities Market (LSM) and in articles 111, 114 and 117 of Royal Decree 217/2008, respectively. The services provided by PIMCO Europe GmbH are available only to professional clients as defined in Section 67 para. 2 German Securities Trading Act (WpHG). They are not available to individual investors, who should not rely on this communication.| PIMCO (Schweiz) GmbH (registered in Switzerland, Company No. CH-020.4.038.582-2). The services provided by PIMCO (Schweiz) GmbH are not available to retail investors, who should not rely on this communication but contact their financial adviser. | PIMCO Asia Pte Ltd (Registration No. 199804652K) is regulated by the Monetary Authority of Singapore as a holder of a capital markets services licence and an exempt financial adviser. The asset management services and investment products are not available to persons where provision of such services and products is unauthorised. | PIMCO Asia Limited is licensed by the Securities and Futures Commission for Types 1, 4 and 9 regulated activities under the Securities and Futures Ordinance. PIMCO Asia Limited is registered as a cross-border discretionary investment manager with the Financial Supervisory Commission of Korea (Registration No. 08-02-307). The asset management services and investment products are not available to persons where provision of such services and products is unauthorised. | PIMCO Investment Management (Shanghai) Limited Unit 3638-39, Phase II Shanghai IFC, 8 Century Avenue, Pilot Free Trade Zone, Shanghai, 200120, China (Unified social credit code: 91310115MA1K41MU72) is registered with Asset Management Association of China as Private Fund Manager (Registration No. P1071502, Type: Other) | PIMCO Australia Pty Ltd ABN 54 084 280 508, AFSL 246862. This publication has been prepared without taking into account the objectives, financial situation or needs of investors. Before making an investment decision, investors should obtain professional advice and consider whether the information contained herein is appropriate having regard to their objectives, financial situation and needs. | PIMCO Japan Ltd, Financial Instruments Business Registration Number is Director of Kanto Local Finance Bureau (Financial Instruments Firm) No. 382. PIMCO Japan Ltd is a member of Japan Investment Advisers Association, The Investment Trusts Association, Japan and Type II Financial Instruments Firms Association. All investments contain risk. There is no guarantee that the principal amount of the investment will be preserved, or that a certain return will be realized; the investment could suffer a loss. All profits and losses incur to the investor. The amounts, maximum amounts and calculation methodologies of each type of fee and expense and their total amounts will vary depending on the investment strategy, the status of investment performance, period of management and outstanding balance of assets and thus such fees and expenses cannot be set forth herein. | PIMCO Taiwan Limited is managed and operated independently. The reference number of business license of the company approved by the competent authority is (110) Jin Guan Tou Gu Xin Zi No. 020. 40F., No.68, Sec. 5, Zhongxiao E. Rd., Xinyi Dist., Taipei City 110, Taiwan (R.O.C.). Tel: +886 2 8729-5500. | PIMCO Canada Corp. (199 Bay Street, Suite 2050, Commerce Court Station, P.O. Box 363, Toronto, ON, M5L 1G2) services and products may only be available in certain provinces or territories of Canada and only through dealers authorized for that purpose. | PIMCO Latin America Av. Brigadeiro Faria Lima 3477, Torre A, 5° andar São Paulo, Brazil 04538-133. | No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission. PIMCO is a trademark of Allianz Asset Management of America L.P. in the United States and throughout the world. ©2022 PIMCO.

CMR2022-1216-2644762

Filters: Reset All

Filters

Close Filters Dropdown
  • Tags

    Reset

    Close
  • Category

    Reset

    Bond by Bond
    Careers
    Economic and Market Commentary
    Investment Strategies
    PIMCO Foundation
    PIMCO Education
    View from the Investment Committee
    View From the Trade Floor
    Viewpoints
    Education
    Close
  • Order By

    Reset

    Alphabetical
    Most Recent
    Close
() filters applied

Video Finder

Filter By:
  • Bond by Bond
  • Careers
  • Economic and Market Commentary
  • Investment Strategies
  • PIMCO Foundation
  • PIMCO Education
  • View from the Investment Committee
  • View From the Trade Floor
  • Viewpoints
  • Understanding Investing
  • A
  • B
  • C
  • D
  • E
  • F
  • G
  • H
  • I
  • K
  • L
  • M
  • N
  • O
  • P
  • Q
  • R
  • S
  • T
  • W
  • Z
Clear
Tina Adatia
Global and Core Fixed Income Product Strategist
Joshua Anderson
Portfolio Manager, Income and Asset-Backed Securities
Del Anderson
Credit Analyst
Robert Arnott
Founder and Chairman, Research Affiliates
Andrew Balls
CIO Global Fixed Income
Justin Blesy
Asset Allocation Strategist
Meredith Block
ESG Research Analyst
Allison Boxer
Economist
David L. Braun
Portfolio Manager
Jelle Brons
Portfolio Manager, Global Investment Grade Credit
Nathaniel Brown
Director of the PIMCO Foundation
Erin Browne
Portfolio Manager, Multi-Asset Strategies
Esteban Burbano
Fixed Income Strategist
Grover Burthey
Portfolio Manager, ESG
Libby Cantrill
Public Policy
Kenneth Chambers
Fixed Income Strategist
Stephen Chang
Portfolio Manager, Asia
Devin Chen
Portfolio Manager, Commercial Real Estate
Josh Davis
Global Head of Risk Management
Laura Deneke
Sr. Vice President, Product Strategist
Pramol Dhawan
Portfolio Manager
Devin Ekberg
Senior Consultant, Advisor Education
David Fisher
Co-Head of Strategic Accounts, U.S. Global Wealth Management
Gene Frieda
Global Strategist
Nick Granger
Portfolio Manager, Quantitative Analytics
Adam Gubner
Portfolio Manager, Distressed Debt
Gregory Hall
Head of U.S. Global Wealth Management
Mary Hoppe
Ray Huang
Portfolio Manager, Real Estate
Daniel H. Hyman
Portfolio Manager
Daniel J. Ivascyn
Group Chief Investment Officer
Mark R. Kiesel
CIO Global Credit
Erica Kinsella
Product Strategist, ESG Strategies
Kaboo Leung
Christine Long
Head of Retirement Marketing
Nicola Mai
Portfolio Manager, Sovereign Credit Analyst
Raji O. Manasseh
Equity Strategist
Samuel Mary
ESG Research Analyst
Kyle McCarthy
Alternative Credit Strategist
Mohit Mittal
Portfolio Manager, Multi-Sector
Alfred T. Murata
Portfolio Manager, Mortgage Credit
John Murray
Portfolio Manager, Commercial Real Estate
John Nersesian
Head of Advisor Education
Roger Nieves
Jason Odom
Strategist, Asset Allocation
Rick Pagnani
Head of Insurance-Linked Securities
Sonali Pier
Portfolio Manager, Multi-Sector Credit
William Quinones
Product Strategist
Lupin Rahman
Portfolio Manager
Libby Rodney
Steve A. Rodosky
Portfolio Manager
Emmanuel Roman
Chief Executive Officer
Steve Sapra
Client Solutions & Analytics
Jerome M. Schneider
Portfolio Manager
Marc P. Seidner
CIO Non-traditional Strategies
Emmanuel S. Sharef
Portfolio Manager, Asset Allocation and Multi Real Asset
Greg E. Sharenow
Portfolio Manager, Commodities and Real Assets
Anmol Sinha
Candice Stack
Head of Client Management, Americas
Kimberley Stafford
Global Head of Product Strategy
Cathy Stahl
Global Head of Marketing
Christian Stracke
Global Head of Credit Research
Geraldine Sundstrom
Portfolio Manager, Asset Allocation, EMEA
Richard Thaler
Distinguished Service Professor of Economics and Behavioral Science at the University of Chicago's Booth School of Business
Mark Thomas
Account Manager, Global Wealth Management
Jessica K. Tom
Senior Credit Analyst
Francois Trausch
CEO and CIO, Allianz Real Estate
Jerry Tsai
Client Solutions and Analytics
Megan Walters
Global Head of Research, Allianz Real Estate
Qi Wang
CIO Portfolio Implementation
Jamie Weinstein
Portfolio Manager, Corporate Special Situations
Tiffany Wilding
North American Economist
Andrew T. Wittkop
Portfolio Manager, Treasuries, Agencies, Rates
Kirill Zavodov
Portfolio Manager
PIMCO
  • Alphabetical
  • Most Recent
Section : Date : Experts :
Reset All
Economic and Market Commentary

Fixed Income Returns in 2023(video)

Fixed Income Returns in 2023

Uncertainty and volatility will remain in 2023 – but the market reset is likely complete, and fixed income returns have become much more compelling. Learn how we leverage our Concentric Circle framework to identify the best opportunities for investors across a wide range of scenarios.

Discover the three economic themes for 2023

Three Economic Themes for 2023
Pursue Diversification and Return with PIMCO’s Quant Strategies
Myths of Alternative Investments
PIMCO Education

Myths of Alternative Investments(video)

Myths of Alternative Investments

Explore how investing in alternatives enables investors to access appealing opportunities in private equity, private credit, and real assets – and how active managers pursue alpha amid rising correlations among traditional investments. Looking for additional information about Alternative Investments?  Visit pimco.com/alternatives or pimco.com/advisoreducation.

Preparing Portfolios for 2023: Consider the Strong Case for Bonds
Economic and Market Commentary

Preparing Portfolios for 2023: Consider the Strong Case for Bonds(video)

Preparing Portfolios for 2023: Consider the Strong Case for Bonds

At the tail end of a challenging year, we reflect on the evolving macroeconomic landscape, including potentially stabilizing inflation, and the opportunities investors may do well to consider in 2023. Learn more from Group CIO Dan Ivascyn.

Securitized Credit: Tapping Into Attractive Valuations

Load more results Load {{cCtrl.fetchResults}} more results