Accumulation of economic recession risks. Pimco is optimistic about global bonds bringing stable returns.

With the possibility of a US economic downturn increasing, The Pacific Investment Management Company (Pimco) highlights the attractiveness of global bonds as a "source of stable returns." The bond management company warns that President Trump's aggressive trade measures, government spending cuts, and immigration policies may drag down the US economy and damage the labor market more severely than expected, supporting their view of leaning towards safer assets in their investment portfolio. Pimco economists Tiffany Wilding and Global Chief Investment Officer Andrew Balls stated in a report, "There are good reasons to shift investments from overvalued US stocks to a broader portfolio of global high-quality bonds." "The market is in the early stages of a multi-year phase, where fixed income performance may outperform stocks, while offering a more favorable risk-adjusted return." In the first quarter of this year, US bonds outperformed US stocks, with a return rate of 2.9%, while the S&P 500 index fell by 4.6%. Currently, the yield on the benchmark ten-year US bonds is around 4.15%, in the mid-range of Pimco's "cyclical range of 3.75%-4.75%." The company said that the rising risk of a US economic recession implies that if the market starts pricing in more rate cuts, yields may further decrease. So far, Pimco's forecasts have been validated. The $180 billion Pimco Income Fund has returned 3.3% year-to-date, outperforming 96% of similar funds, making it the world's largest actively managed bond fund. In its latest outlook, Pimco recommended investors diversify their investments in the global bond market, particularly increasing exposure to bonds in the UK and Australia. In contrast, the company believes that long-term bond exposure in Europe is less attractive due to significant fiscal pressures, and expects that bond yields in the Eurozone market will steepen. Currently, the yield on the German ten-year government bond is around 2.70%. Pimco has raised its "expected range" for this yield from 2.0%-3.0% to 2.5%-3.5%, indicating the possibility of further repricing. Pimco had previously noted at the beginning of the year that market uncertainty would help boost bond returns. Last month, Pimco Chief Investment Officer Daniel Ivascyn reiterated this prediction and urged investors to increase exposure to 5-10 year bonds. In mid-January this year, US bond yields peaked, with the five-year US bond yield reaching 4.6% and the ten-year US bond yield reaching 4.8%. Subsequently, mid-term bond yields have dropped by about 60 basis points, mainly driven by signs of weakened consumer and business confidence due to tariff effects. Additionally, the stock market decline has prompted investors to view government bonds as a safe haven for multi-asset portfolios. Pimco also provided other investment views for investors in the next 6-12 months. The company stated, "Historically, initial bond yields are closely related to five-year forward returns," adding that the domestic bond market may benefit from funds flowing out of the US; in the hard currency bond market, the availability of investment-grade corporate bonds is increasing and attractive. Additionally, Pimco expects the Federal Reserve to cut rates by another 50 basis points this year, but faces challenges in decision-making due to the conflicting effects of rising inflation and slowing economic growth.