Foreign media reports that Pacific Investment Management (Pimco) believes one of the biggest risks in 2021 is betting that the vaccine will soon end the New Coronavirus (CCP) outbreak.
With growth-related assets at or near record levels, the biggest risk may be that the market reflects the expectation of an end to the outbreak too soon, and the market could easily become a bit too optimistic, said Robert Mead, co-head of Asia Pacific portfolio management at Pimco.
Mead is also optimistic about the possibility of an outbreak of Inflation and interest rate risk, and still has an overall positive outlook for growth in developed and emerging economies this year. He expresses his views by betting on a steepening yield curve in Australia and the U.S., but his positions have moderated compared to last year.
Mead’s strategy is based on the premise that while economies are seeing a pickup in prices, inflation targets remain out of reach and major central banks are unlikely to raise borrowing costs for at least the next three to four years.
Mead said the bank does not seem to think the yield curve will reprice significantly, as central banks will be watching and wary of a complete shift in borrowing costs across the economy. While inflation is something to consider, there is no concern about the 12-month inflation outlook.
Pimco has cut its long position in inflation-related investment instruments, and break-even inflation has rebounded from last year, Mead said, when the market thought inflation would not pick up again.
Recent Comments