Recent market volatility suggests that investors are questioning whether the post-crisis subpar pace of economic growth, which we dubbed The New Normal, is subsiding, to be replaced by more traditional late-cycle outcomes – in particular faster inflation and tighter monetary policy.

U.S. inflation continued to accelerate in January, with a 0.349% month-over-month advance in core Consumer Price Index (CPI) inflation (which excludes food and energy prices) – the strongest gain since 2001.

Untethered to traditional bond benchmarks, unconstrained bond strategies can respond to current changing market conditions in various ways.

With a steady repricing of global bond markets having contributed to a sharp plunge in global stock markets, there could be a whiff of a new era in the air.

The topic of housing finance reform has come in and out of focus on Capitol Hill since Fannie Mae and Freddie Mac (the government-sponsored enterprises, or GSEs) were taken into conservatorship back in 2008.

PIMCO takes a long-term view of markets and economies, one that anchors investment decisions during shorter-term periods of market volatility. Nonetheless, the dramatic return of market volatility has understandably unnerved many investors.

A monthly review of market-moving events across countries and asset classes, and what investors can expect going forward.

The U.S. economic numbers released last week preceded a slide in equities, prompting keen interest in what the data may have been signaling to markets.

With the dramatic spike in market volatility over the past week, many investors are asking what comes next.

We expect policy will continue to drive municipal bond markets in 2018, if more constructively than in 2017. Municipal investors may remember 2017 as the year of unrealized policy fear. While the threat of tax reform and its potential to reduce the value of the muni exemption for retail investors ­loomed large, ultimately it had little impact on individual municipal bonds.

Going into Federal Reserve Chair Janet Yellen’s 32nd and final meeting, neither we nor the markets expected the Fed to make much news. Of note, however, in its statement after the meeting on 31 January, the Fed acknowledged recent firmer economic data and expressed confidence in inflation moving toward the 2% target later this year.

Investors in Europe are more optimistic than they have been in years, but there is growing concern that U.S. dollar weakness could make the euro too strong.

Economic recovery is in full swing but investors should remain vigilant of the long-term risks.

Nominal growth is likely to pick up, reflecting some recovery in real GDP and a gradual rise in inflation.

Integrating ESG into sovereign risk analysis adds a holistic and long-term perspective that is aligned with investing in sovereign fixed income.

Fixed income exchange-traded funds (ETFs) saw a record $126 billion of inflows in 2017, bringing the overall market to nearly $600 billion. The majority of these flows, as well as existing assets under management, are in passive bond ETFs. But are passive, index-tracking approaches the best way to harness the fixed income opportunity set?

After a four-year downturn in the oil and gas master limited partnership (MLP) sector, marked by a roughly 47% decline in market value, we believe sentiment toward the sector may be turning. With dividend yields approaching 8% – along with increasing free cash flow and a robust U.S. production outlook...

Although much of 2017 represented a series of fits and starts in Washington, the Trump administration and the Republican-led Congress ultimately – and against long odds – delivered on one of their biggest campaign promises: a relatively sweeping rewrite of the tax code, representing a likely boost to 2018 U.S. real GDP of 0.2%–0.3%.

Like much of 2017, politics remained keenly in focus at the end of the year. Tax reform took center stage in the U.S., and President Trump wrapped up this major legislative victory just in time for the holidays. The sweeping tax overhaul moved quickly through both chambers of Congress after the House and Senate drafted amended versions from the separate ones each had previously passed.

Years of significant growth in the U.S. corporate bond market have been accompanied by a steady decrease in overall credit quality and a trend toward higher leverage. Close to $80 billion in U.S. corporate bonds currently rated BBB potentially could be downgraded below investment grade in 2018, according to our estimates.

Investors may want to consider taking a more cautious and selective approach to BBB nonfinancial corporate bonds, particularly those in the low BBB rated segment, where the risk of downgrades is higher and the room for error is lower.

That said, we find many compelling BBB bonds in the U.S. marketplace today. As a large active fixed income manager, PIMCO is in our view ideally positioned to manage the risks in the complicated universe of BBB bonds.

In this issue, Research Affiliates provides its outlook for 2018 and discusses where it sees attractive return opportunities across the globe.

Equity investors in search of higher returns are increasingly turning to factor investing. Driving this trend is frustration with the underperformance and higher fees of traditional active equity approaches, along with a growing realization that many stock-picking strategies owe their results largely to the manager’s factor tilts rather than stock-specific risk. 

The conclusion from PIMCO’s latest Cyclical Forum is that 2017–2018 could well mark the peak for economic growth in this cycle and that investors should start preparing for several key risks that lie ahead in 2018 and beyond.

After a strong run in emerging markets through the first nine months of 2017, a recent performance setback in local bond markets has led some investors to fear that the recovery cycle may be short-circuiting. Is the two-month run of underperformance in EM local markets an opportunity or a canary in a coal mine?

We expect the global expansion to continue in 2018. Yet investors should prepare for both the consequences of policy shifts and the opportunities presented in more difficult market conditions.

Despite a rate hike, monetary policy remains accommodative.

A review of last month’s market-moving events across countries and asset classes.

Congressional Republicans’ efforts to reduce taxes and reform certain elements of the U.S. tax code have been impressive thus far. In a matter of weeks, the House has passed its version of a bill, and the Senate is hoping to take up its own bill later this week.

Ben Bernanke and our panel of world-renowned advisors examine the outlook for global economic growth amid geopolitical shifts.

Growth in China’s offshore corporate bond market seems likely to continue in 2018, driven by the financing needs of investment grade state-owned enterprises (SOEs) and private sector...

Core U.S. Consumer Price Index (CPI) inflation rose 0.22% month-over-month in October, broadly in line with expectations for firming price trends but notably stronger than the 0.14% average monthly pace this year.

As many traditional credit sectors begin to approach full valuations, credit investors may want to look in new directions for attractive returns with manageable downside risk. In diversified credit portfolios today, de-risking and building liquidity are important, but we also see attractive relative value opportunities in a couple of (sometimes overlooked) sectors.

A review of last month’s market-moving events across countries and asset classes

The transition from Libor to SOFR as a benchmark short-term rate needs to be undertaken with tremendous care, and PIMCO would like to help by outlining clear steps for stakeholders...

How we’re positioning muni portfolios for turbulence – and the opportunities it may create.

Creative solutions may be needed to address remaining asset quality issues in Europe’s banks.

With stocks hitting record highs, many investors want to mitigate the largest source of risk in their portfolios – equities. In recent decades, fixed income has served this purpose well. The asset class has generally delivered both positive returns and negative correlations with equities.

President Trump has announced Fed Governor Jerome Powell as his nominee for Chair of the Federal Reserve Board. A Fed governor since 2012, Powell has been confirmed twice by the U.S. Senate and likely will be confirmed as chair without controversy in time to take over when current Chair Janet Yellen’s term expires in February 2018.

For the first time in over 10 years the Bank of England raised its official policy rate, a hike of 0.25% to 0.5%. The rationale is a combination of growth continuing at or slightly above trend, unemployment falling further from its current 42-year low...

One could argue that this latest statement came in on the dovish side. But a broader read rapidly dispels that notion.

Our central expectation for the European Central Bank (ECB) meeting on 26 October is for the Governing Council to extend asset purchases by nine months at €30 billion per month to September 2018, without yet committing to a specific end date, while strengthening its commitment to keep policy rates and the balance sheet unchanged when asset purchases end next year.

Actively managed front-end strategies may be able to mitigate the erosion of real capital experienced in passive benchmarks as rates rise.

A global factor helps explain why central bank policies often tend to be correlated across countries.

Unprecedented changes are reshaping the financial advice industry and affecting portfolio construction for individual investors. New regulation, technological innovation, capital market trends and the prospect of lower future returns are all exerting profound effects.

The governing coalition of Abe’s Liberal Democratic Party (LDP) and the smaller Komeito Party staged a big win in the snap election. Although recent public polls indicated a victory, the final tally was on the higher side of consensus expectations, including ours.

If the pace of monetary tightening in the U.S. is any sort of leading indicator for policy tightening in the rest of the world, including Australia, then in Australian parlance, it will be “like watching grass grow.”

Emerging markets debt and equity have many overlapping traits, but also differ in their exposure to countries and risks. The MSCI Emerging Markets Index contains 27 countries, with the five largest accounting for 70% of market value. Three countries in Asia - China, South Korea and Taiwan - comprise more than 50% of the index.

Global central bankers, ministers of finance and representatives from the private sector and civic groups gathered in Washington, D.C., last week for the Annual Meetings of the IMF (International Monetary Fund) and the World Bank Group.

Despite a hurricane-related surge in headline inflation, core inflation continued to run softer than expected in September, a trend that could make the Federal Reserve more cautious about hiking interest rates in December.

Last Month in Perspective: The convoy of developed world central banks reducing policy accommodation appeared to gather steam. Global political developments continued to capture headlines. Interest rates moved higher on the hawkish tilt in central bank rhetoric, and equities gained on generally positive economic data.