Prior to the COVID shock, we had anticipated a difficult investment environment subject to a range of long-term disruptors, including China’s rise, populism, technology, and climate-related risks. The pandemic has amplified these disruptors and created an even more challenging landscape for investors.
In our latest Secular Outlook, we discuss the importance of being prepared for a variety of disruptions and actively pursuing opportunities that arise when volatility occurs. As always, our outlook derives from our annual Secular Forum (this year held in September), which included PIMCO’s global investment professionals and Global Advisory Board as well as distinguished guest speakers. This blog is a distillation of our outlook and investment implications.
The economic outlook
We forecast above-trend growth for a couple of years as the global economy emerges from the COVID recession. However, we think concerns voiced at our forum that “economic scarring” will weigh on potential output growth are warranted.
Three factors are likely to weigh on longer-term productivity growth: Longer spells of unemployment typically imply an erosion of individuals’ skills, higher uncertainty will likely depress business investment for a long time, and an increasing “zombification” of the corporate sector is expected due to massive government and central bank support.
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