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Economic Fallout: Here Comes Congress!
The massive U.S. stimulus bill that President Trump signed last week is designed to help individuals and businesses facing disruption caused by the coronavirus. However, Congress may have to do more in the months ahead.
In Europe the Crisis Policy Response Is Substantial, But More Is Likely Needed
Over the past few weeks, European countries have stepped up virus containment measures aggressively, with most of the region now in lockdown. Gauging the exact economic impact of these measures is hard.
Policymakers: Pulling Out All The Stops
In the face of the most serious global health crisis in more than a century, fiscal and monetary policymakers around the world will very likely have to pull out all the stops in an effort to prevent what currently looks like an inevitable recession from turning into a depression, and to stop financial markets from shifting from a drawdown into a meltdown.
Economic Outlook Update: ILU Trajectories
The spread of COVID 19, volatile financial markets, new historical lows for U.S. bond yields, and a rare intermeeting rate cut by the Federal Reserve made for a highly unusual backdrop for PIMCO’s quarterly Cyclical Forum in early March.
When Rate Cuts and Quantitative Easing Fall Flat
The plunge in the 10-year U.S. Treasury yields over the last week reflects the growing anticipation that the Fed and other central banks will cut rates and use other policy tools, including quantitative easing, to keep financial conditions from tightening during this period of volatility.
Fed Moves First to Counter COVID 19 Market Fears
the Federal Reserve surprised markets with an emergency interest rate cut of 50 basis points (bps). The Fed’s move is likely the first in a series of synchronized actions by the G-7 aiming to support developed market economies as the coronavirus continues to spread outside of China.
Asset Allocation Views: Prolonging the Expansion
Following a bumpy 2019 for global growth, we see economic momentum recovering in 2020. While the global health crisis adds uncertainty to the economic outlook, we believe the economic and market risks will be temporary.
Growth, Inflation, and the Potential for Disruption
Corporate Credit, Housing, and the Next Recession
March May Matter More for Investors Watching U.S. Primaries
Over the next few weeks, the financial markets may react to the early primary results, but we think it is important for investors not to get sidetracked by any primary-related volatility. The 2020 Democratic nominating contest could last longer than previous primary cycles – and the ultimate outcome could look quite different from the results in the early contests.
Oil Prices and the Ripple Effects of ESG
Environment, social, and governance factors have been playing an important role in commodity markets since long before the term “ESG” became popular.
Key Geopolitical Risks to Oil in 2020
The areas of greatest concern today tilt primarily to upside risk to prices, particularly with an easing of U.S.–China trade tensions. However, there are regions and scenarios we do not have the space here to discuss, we expect new risks will likely emerge, and not all risks will be price-bullish.
Sponsored Repo: Salve for a Constrained Repo Market, or Potential Funding Destabilizer?
A series of imbalances have arisen in money markets in the decade since the financial crisis, including September’s dramatic spike in overnight repo rates. We believe market participants’ increased reliance on overnight funding and banks’ reduced ability to intermediate money markets under post-crisis regulations were key drivers of this spike – and continue to leave repo markets vulnerable.
The End of the Beginning
While the election result reduces Brexit uncertainty significantly, it doesn’t eliminate it. Will there be an extension of the transition period? How will any deal affect the economy? In the meantime, UK banks and sterling, especially wounded since the 2016 referendum, still offer value, while low-yielding gilts look unattractive relative to other government debt, such as U.S. Treasuries.
Treading Carefully: Risk and Opportunity in CLOs and Bank Loans
A Shift in Approach Could Help Keep Short‑Term Markets Liquid
China CPI Breaks 3% PBOC Target: What Does It Mean for Policy?
Impeachment Could Be Both Bad News and Good News for Trade Policy
These are extraordinary times in Washington, D.C., in which President Donald Trump is only the fourth president in U.S. history to face an impeachment inquiry. Regardless of the outcome, the impeachment proceedings will likely dominate Washington for the foreseeable future.
U.S. Equities: Calm on the Surface, Turbulent Within
September Fed Meeting: Divisions Over the Path of Policy
As expected, the Federal Open Market Committee (FOMC) reduced the fed funds range by another 25 basis points to 1.75%–2.00% at its September meeting, making this the second cut since the Federal Reserve stopped hiking interest rates last December. However, we see two bigger takeaways from Wednesday’s meeting. First, Fed officials remain divided on the appropriate near-term path for interest rates; and second, the Fed could announce a change to its current balance sheet policy as early as October.
Saudi Oil Site Attacks Exacerbate Tightening Supply, Add to Price Risk Premium
Oil prices surged Monday after attacks on Saudi Arabia’s Abqaiq processing plant and Khurais oil field Saturday suspended more than half the country’s oil production. While the ultimate impact will depend on a combination of the extent of damage, the U.S. and Saudi response, and whether further attacks occur, the current production decline will exacerbate the tightening in the oil market that was already underway and could add a more lasting geopolitical risk premium to prices.
Oil Supply Outlook: Is Your Barrel Half Full or Half Empty?
Disruption in the Eurozone: Challenges of an Arranged Marriage
Global Fetters: Insights From Jackson Hole
While Federal Reserve Chair Jay Powell’s speech at the Jackson Hole Economic Policy Symposium last week didn’t break any new ground other than confirming market pricing for further near-term rate cuts, several academic papers presented at the symposium and Bank of England Governor Mark Carney’s luncheon speech provided deeper insights into global monetary linkages that have become an increasing headache for central bankers both in the U.S. and elsewhere. While a brief blog post won’t do justice to all of these contributions, here are my main takeaways.
Yield Curve Inversion: Markets Are Correct to Price In Higher Recession Risk
On 14 August, the yield spread between two-year and 10-year U.S. Treasury bonds moved below zero for the first time since February 2006. Though it has since widened back to positive territory, the move was significant because such “inversions” of the yield curve – in which short-maturity yields exceed those for longer-maturity bonds – have preceded nearly all recessions dating back to the 1950s. The move has also, understandably, made investors more wary of the economic outlook.
Summer of Discontent: Market Volatility Underscores Fragility of Aging Expansion
The proximate causes of the volatility have been building sources of uncertainty, initially from a Fed press conference that appeared less accommodative than markets had hoped and then from escalating tensions between the U.S. and China given a surprise tariff announcement by the U.S. and an unexpected currency adjustment by China.