The secular convergence toward modest real growth rates across the global economy has many investors yearning for yield and considering credit to help them reach their longer-term goals. Mark Kiesel, Deputy Chief Investment Officer and global head of corporate bond portfolio management, explains how PIMCO uncovers credit opportunities with secular staying power. His insights derive from both the credit team’s robust research process and the firm’s top-down, long-term views, articulated recently at the PIMCO Secular Forum. We describe the modest-growth world with low central bank policy rates in the years ahead as a New Neutral.
What is your secular outlook for global credit markets?
Kiesel: The secular outlook for credit remains constructive. We see healing underway in developed markets balanced against slowing growth in emerging markets. In fact, it is the slow global growth outlook that allows developed market central banks to maintain lower-for-longer interest rates, which in turn support continued high demand for high quality income-producing assets. Other secular trends, such as aging populations in developed markets, also point to continuing demand for credit.
Another secular constant is investors’ desire to find the best companies anywhere in the world and the best opportunities within those companies – up and down the capital structure. This means demand could increase for unconstrained or absolute return credit strategies that look to pinpoint those kinds of opportunities.
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