Investment management heavyweight Pimco has told multi-asset investors it expects to see regional divergence in growth, inflation and central bank policy.
In an asset allocation outlook put together by portfolio managers Erin Browne and Emmanuel Sharef, the firm said it expects US economic resilience to persist, but inflation remains a risk.
They also noted the upcoming election in the US could be a key theme as the year progresses. “The 2024 US elections have important implications for markets at both the macro and sector levels,” they said.
“Neither political party has appetite for additional large-scale fiscal stimulus, nor for reforms to long-term spending. However, divergences in trade, tax, industrial, and other policy areas mean that consequences will vary based on the occupant of the White House and the makeup of Congress.”
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Turning to other parts of the world, Browne and Sharef pointed to opportunities in fixed income as something to watch for.
“Central bank policy should bolster fixed income investments in developed markets outside the US, such as Australia, Canada, the UK, and the eurozone,” they wrote. “We also favour US agency mortgage-backed securities and several areas of securitised credit, given their attractive risk/reward profiles.”
The pair added that in managing multi-asset portfolios, emphasising quality and diversification will be particularly important this year.
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“Top-down and bottom-up signals have us modestly overweight equities, with a focus on US large-cap stocks, select emerging markets, and some industrial cyclicals. Equity allocations should also help mitigate inflation risk.
“We believe US large-cap stocks, sovereign bond markets outside the US, and select securitised credit opportunities look especially attractive. Across markets, a rigorous, active approach helps us identify compelling opportunities while managing risks.
“Overall, we see a target-rich environment for multi asset portfolios.”
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