S EC U L A R
O U T LO O KJ U N E 2024

Yield
Advantage
The post-pandemic inflation shockand rate-hiking cycle produced agenerational reset higher in bond yields,
creating a compelling multiyear outlook
for fixed income as inflation recedes
and risks build in other markets.

SECUL AR OUTLOOK • JUNE 2024

W R I T T E N B Y:
Richard Clarida
Global Economic Advisor
Andrew Balls
Chief Investment Officer
Global Fixed Income
Dan Ivascyn
Group Chief Investment Officer

1

The global economy continues to recover from pandemic aftershocks, including trade dislocations,outsize monetary and fiscal interventions, a prolonged inflation surge, and bouts of severe financial
market volatility. At PIMCO’s 2024 Secular Forum, we explored how the aftereffects of those
disruptions are producing some unexpectedly positive developments while also introducing longerterm risks.
Among the positives, disinflation has occurred more rapidly than anticipated in most developed
market (DM) economies. Moreover, macroeconomic and inflation risks look more balanced thanthey did at our prior Secular Forum a year ago. Central banks are also poised to pivot toward ratecuts, likely on different schedules.
However, we see three main areas where investors have benefited but may be overlooking risks
that could develop over our five-year secular horizon:1) L arge-scale fiscal stimulus has fueled recent standout U.S. growth, but that exceptionalism
has come at a cost: The U.S. is on an unsustainable debt trajectory that the government will
ultimately need to address. Meanwhile, financial markets may increasingly need to operate
without expectation of government support.
2) Artificial intelligence (AI) is poised to realign labor markets and boost productivity, but significant
economic impacts may take years. Massive capital investment has accompanied rapid stock
market gains in ways reminiscent of past tech booms.
3) A sset valuations in some markets offer investors little apparent cushion. This includes equities,
where valuations appear stretched, and lower-rated corporate direct lending markets that are lessliquid and more exposed to floating interest rates.
For investors, the early 2020s inflation shock and steep policy rate hikes produced a generational
reset higher in bond yields, which now embed significant inflation-adjusted cushion. Starting yields
are highly correlated with five-year forward returns. That supports an attractive long-term outlook
for fixed income returns as inflation recedes, particularly on a risk-adjusted basis relative to otherassets. Opportunities across global bond markets also appear uncommonly attractive and diverse,with active country and security selection being key.
We believe this secular backdrop merits a rethinking – and even a reversal – of the traditional 60%
stocks / 40% bonds asset allocation paradigm.
As banks retreat from certain markets, we also see attractive opportunities in asset-based lending,particularly consumer-related areas given the strength of the U.S. consumer. We expect bankdisintermediation and capital needs will create opportunities in commercial real estate (CRE) debt.
Our Secular Forum sessions explored how the U.S. and China are leading a shift toward a
multipolar world order that is likely to alter market and policy dynamics. The peace dividend
that countries enjoyed in recent decades is turning into a conflict expense that could be a
disruptive force.

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SECUL AR OUTLOOK • JUNE 2024

2024 Secular Forumguest speakers
Tobias Adrian
Financial Counsellor and Director of
the Monetary and Capital Markets
Department, International Monetary Fund
Anima Anandkumar
Bren Professor of Computing andMathematical Sciences, Caltech
David Autor
Ford Professor of Economics, MIT
Jason Furman
Aetna Professor of the Practice of
Economic Policy jointly at Harvard
Kennedy School and the Department of
Economics, Harvard University
Kevin Hassett
Brent R. Nicklas Distinguished Fellow in
Economics, Hoover Institution; former
Chair of the White House Council of
Economic Advisers
John H. Cochrane
Rose-Marie and Jack Anderson Senior
Fellow, Hoover Institution
Carmen Reinhart
Minos A. Zombanakis Professor of theInternational Financial System, Harvard
Kennedy School

Secular theme: Balanced risks,
but beware golden ages
Our 2023 Secular thesis, “The Aftershock Economy,” argued that the early2020s disruptions would create an enduring new reality. We saw a worldof elevated macroeconomic volatility and sluggish growth. We predictedthat central banks would do whatever it takes to return inflation to “2-pointsomething” percent.
While this thesis broadly continues to hold, our outlook for the next five years
must incorporate and assess major developments since our May 2023 forum:• A war breaking out in the Middle East and a war in Europe dragging into its
third year
• Rapid and – so far – painless disinflation to “2-point-something” percent inmost DM economies• Material divergence of inflation and growth trajectories between the U.S. andother DM economies• An unforeseen doubling of the U.S. budget deficit in an economy with nearrecord low unemployment• An October “Treasury tantrum” triggered by worries that the unsustainable U.S.
fiscal trajectory will worsen in the years ahead• Continued bank retrenchment amid tightening regulations for capital and liquidity
Our secular views also build upon our latest Cyclical Outlook, “Diverging
Markets, Diversified Portfolios.” That outlook sees central banks breaking ranks
to follow varied rate-cutting paths, with relative U.S. strength persisting while
many large DM economies slow. That has produced a “re-risking” theme in U.S.
financial markets, as well as questions about whether these trends are short-

Brad Setser
Whitney Shepardson Senior Fellow at theCouncil on Foreign Relations

term or more enduring.

Wendy R. Sherman
Former U.S. Deputy Secretary of State

The sharp post-pandemic cyclical adjustments that rippled through the global

PIMCO’s Global Advisory Board
World-renowned experts on economic
and political issues

implications. While we continue to expect sluggish global growth and more

CENTRAL BANKS HAVE MAINTAINED FLEXIBILITY …
economy are now giving way to more lasting secular trends and with importantvolatile business cycles over our secular horizon, the risks around that outlook
appear better balanced than they did a year ago.
That’s partly due to the quick return of inflation in most advanced economies to“2-point-something” percent levels. Rapid policy tightening brought the inflation
spike under control and did so without medium-term inflation expectations rising.

SECUL AR OUTLOOK • JUNE 2024

3

… BUT FISCAL SPACE IS CONSTRAINEDThe better balance of risks is also due to central banks’ tacit
adoption of an “opportunistic disinflation” strategy to navigate
the remaining journey toward target levels. This strategy allows
policymakers some leeway to lower rates to support growth attimes when inflation appears subdued.
Concerns we had last year about tight monetary conditions
triggering financial instability have not materialized.

While the monetary policy backdrop has improved, the fiscal
outlook has not. The global fiscal trajectory was a focus of thisyear’s Secular Forum, especially the path of U.S. federal debt.
It remains to be seen whether cyclical U.S. economic strengthis durable or merely fueled by pandemic-period government
support and a rising debt-to-GDP ratio. If the U.S. eventually

Systemic risks to global banking and nonbank financial

faces a fiscal reckoning, debt consolidation through entitlement

markets appear contained.

spending reforms and higher taxes is likely. However improbableThat said, regulatory trends are clearly moving toward stricter
bank capital and liquidity requirements. Banks’ inability toprovide balance sheet capacity in certain markets will likely

it seems in the current political environment, even the seemingly
untouchable may have to evolve.
The massive stock of sovereign debt relative to GDP hanging

further push many lending activities to private capital.

over advanced economies (see Figure 1) will likely cause
yield curves to steepen over our secular horizon, as investors

We see a growing window for investors to step in as seniorcontinue to demand more compensation on longer-term

lenders in areas once occupied by regional banks, such as
consumer lending, mortgage lending, and equipment finance.
CRE will also present opportunities for flexible capital, as bankretrenchment exacerbates challenges posed by declining realestate prices and a more than $2 trillion wall of maturing loans1
over the coming years.

bonds. There is evidence – for example, forward inflationindexed yields or estimates of the Treasury term premium– to suggest that markets have already priced in some of thisadjustment, even before central banks start to cut rates (tolearn more, see our recent piece, “Will the True Treasury Term
Premium Please Stand Up?”).

Figure 1: Fiscal space likely to be limited
U.S.

Advanced economies

140%
WWII debt
spike

Public debt as a percentage of GDP

120%

Globalfinancial crisis

?

100%

80%

60%

40%

20%

2023

2018

2013

2008

2003

1998

1993

1988

1983

1978

1973

1968

1963

1958

1953

1948

1943

1938

1933

1928

1923

1918

1913

1908

1903

0%

Source: International Monetary Fund (IMF), Carmen Reinhart, Kenneth Rogoff, PIMCO; annual data through December 2023. “Advanced economies” refers to
G-20 advanced economies (Australia, Canada, France, Germany, Italy, Japan, South Korea, U.K., and U.S.) through 2015 and all IMF-defined advanced economies
through 2023.

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SECUL AR OUTLOOK • JUNE 2024

Authorities will almost surely face more constraints when

Risks to financial stability have also increased and could

looking to discretionary fiscal policy to limit the damage frombecome problematic should these conflicts begin to materiallyfuture business cycle downturns. Our baseline is not a sudden

alter cross-border financial flows or create conditions for capitalfinancial crisis, but recurring episodes of market volatility when

impairments. We believe the risk premium for credit investment

focus shifts to fiscal issues.

in China is too low to be attractive given potential risks.

Despite these fiscal pressures, we believe that the U.S. dollar

We expect China’s growth to continue slowing without stalling.

will remain the dominant global currency, in no small part

Notably, China is re-globalizing. Its new growth model, focused

due to the lack of a viable challenger. A U.S debt reckoning

on production and infrastructure to counterbalance a property

could eventually come about, but it’s not likely imminent given

sector collapse, is driving a rise in manufacturing exports. This

U.S. advantages in immigration, productivity, and innovation;

pivot requires reevaluating China’s role in the global economy,

U.S. Treasuries being a global reserve asset; and the generalespecially its impact on commodity markets and inflation, as

dynamism of the U.S. economy. An elevated demand for U.S.

well as its integration into the global financial order.

Treasury securities as a “safe haven,” liquid store of valuehas, to date, limited the bond market’s concerns about fiscal
sustainability. That suggests the timeline for fiscal reforms
may be super-secular.

Major emerging markets (EM) have displayed remarkable
resilience this cycle. The typical combination of factorsthat often trigger EM crises – capital flight, tighter financial
conditions, and a collapse in commodity prices – is not

The U.S. may still be the “cleanest dirty shirt” compared withcurrently evident, nor does it appear likely to emerge over theother economies. China’s outlook is challenged by property

secular horizon. Debt levels in EM countries are increasing but

sector recession, an aging population, and less-open export

so far remain at sustainable levels compared with DM.

markets. In Europe, fragmented politics will make it difficult tobuild a comprehensive growth strategy in the face of regional
conflict, energy insecurity, and more direct competition from
China on higher-value manufactured goods.

MOVING TO A MULTIPOLAR WORLD
The geopolitical landscape is increasingly defined by tensions
between a dominant superpower (the U.S.) and its rising rival(China). Both China and Russia have clear long-term visions that

Roughly 60% of the world by GDP weight will be voting in a
major election this year. With early signs of populist parties
gaining support – particularly in Europe – global elections
have scope to change both economic and geopolitical policy
priorities. We see risks that elections increase trends towardfragmentation, multipolarity, and protectionist measures,favoring friend-shoring investments. Countries such as India,
Indonesia, and Mexico are positioned to benefit.

are at odds with Western ideals. The peace dividend realized

Turning to the U.S. presidential election, we believe trade,over the past three decades is becoming a conflict outlay.

tax policy, immigration, regulation, and environmental policy

This underscores a shift toward a multipolar world order,
where cooperation seems limited and new middle powers may
emerge. The shift will likely also lead to changing correlations
across markets and increased divergence in potential growthand policy responses. Business cycles will likely also be lesssynchronized. We expect the underlying forces will lead togreater macroeconomic and financial market volatility thanpre-pandemic.

have the greatest scope for disruption. U.S. fiscal deficits arelikely to remain near historic highs regardless of the election
outcome. Both political parties are also focused on remaining
tough on China.

SECUL AR OUTLOOK • JUNE 2024

5

AI EFFECTS COMING INTO FOCUS

NEUTRAL POLICY RATES TO REMAIN LOW

Generative AI has the potential to transform labor markets andToday’s elevated policy rates are the result of cyclical forces,

democratize access to decision-making tasks, enabling more

namely an inflationary spike. Once inflation stabilizes nearof the workforce to make informed decisions.

central bank targets, we expect neutral monetary policy rates

But many organizations will face challenges as they seek toleverage AI effectively. Dramatically enhanced productivity

in advanced economies will likely settle at levels below thosethat prevailed before the global financial crisis.

and efficiency may not be evident in the macro data over the

We believe the neutral nominal policy rate in the U.S. overnext five years. This is because maximizing the payoff fromour secular horizon will likely remain in the range of 2%–3%

AI at the macro level will require not only adoption of the(implying a long-run neutral real rate of 0%–1%). By contrast,

technology itself, but also the reconfiguration of work streams

current pricing indicates markets expect the neutral rate may

and the rethinking of production processes at the micro level of

not fall far below 4%. That can present further opportunities forindividual organizations.

bond investors, as yields today already embed cushion in the

Similar to the experience with other new technologies over theform of positive real rates and term premium.

past few decades, there may not be much of an incremental

We expect central bank balance sheets, which are currently

impact on productivity from modest enhancements of existing

contracting under quantitative tightening (QT) programs, will

work practices. But there is a chance of breakthrough changes

remain substantially larger than before the era of quantitativethat could have a larger impact on productivity growth ineasing (QE). DM central banks will likely continue to use asset

certain specific areas, such as healthcare and science.

purchase programs to ensure the smooth functioning of

While our base case is that the full impact of new AI large
language models manifests gradually over the secular horizon,
it’s possible that disruptions may occur more quickly. The
capital spending boom in computing, data centers, and green

sovereign debt and repurchase markets, and to act as lendersof last resort. Examples include the U.S. Federal Reserve’s
2023 Bank Term Funding Program and the Bank of England’s
2022 operation to support the U.K. gilt market.

energy technology increases availability of these resources

However, we think it is less likely that central banks deploy

for applications beyond AI, while AI investment makes AI-

open-ended QE asset purchase programs in response to future

supported breakthroughs in other fields increasingly plausible.

economic downturns. The financial strain of maintaining large

Downside surprises are possible as well, especially if misusesecurities portfolios, where the costs of funding exceed theof AI models for surveillance, manipulation, or security threats

returns from these assets, has become increasingly apparent.

results in innovation-stifling restrictions.

Monetary and fiscal puts – or expectations of government

For now, capital spending can lead to a shorter-term sugar

relief in the event of downturns – are further out of the money

high. Ultimately, efficiency gains will be needed to generate

today. That constrains the government’s ability to stimulate

longer-term sustainable growth.

flagging economies and provide support to dampen shocks.

The demand for chips, data centers, and the generation
capacity that will power them is expected to be explosive, andthese trends will have immediate sectoral consequences.

We expect additional volatility as markets trade more on
fundamentals and less on the expectation that governments
will come to the rescue.

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SECUL AR OUTLOOK • JUNE 2024

Investment implications:Fixed income resurgence
Our 2024 Secular Outlook favors a renewed focus on public
fixed income markets, which we believe are poised togenerate competitive returns and lower risk compared withother asset classes. Today’s yields and a stabilizing inflation
outlook are enabling bonds to reassert their fundamental
advantages in portfolios: providing potential for attractive
income, downside resilience, and stability through reduced
correlation with equities.
Many sophisticated asset allocators have moved well beyond
the traditional 60% stocks / 40% bonds paradigm. Evenso, it remains an oft-cited rule of thumb that frames many
investment conversations. We believe we are entering an era
that warrants a rethinking and a reversal of that concept.
The post-pandemic inflation shock and subsequent central
bank rate-hiking cycle reset bond yields sharply higher.
Historically, starting yields are highly predictive of bondreturns over a multiyear horizon (see Figure 2). The yields on
the Bloomberg U.S. Aggregate and Global Aggregate (hedged
to U.S. dollar) Indexes, two common benchmarks for highquality bonds, are about 5.31% and 5.41%, respectively, as of
30 April 2024.
Using that as a baseline, active investment managers canseek to enhance the yields investors earn. By identifying
attractive opportunities in high quality areas – such as agency
mortgage-backed securities – active managers can currently
construct portfolios yielding about 6%–7% without taking on
significant interest rate, credit, or illiquidity risk.
As a result, a diversified bond allocation offers the potential
for long-term equity-like returns with a more favorable riskadjusted profile, especially given what may be stretchedvaluations in stock markets (see Figure 3). Markets don’t
appear to price significant recession risk, meaning bonds may
be an inexpensive means to hedge that risk.

SECUL AR OUTLOOK • JUNE 2024

7

Figure 2: Starting yields in bond markets historically correlated with 5-year forward returns
Bloomberg U.S. Aggregate Bond Index: yield

Bloomberg U.S. Aggregate Bond Index: forward 5-year return

25%

20%

94% Correlation

15%

Yield as of 30
April 2024:
5.31%

10%

5%

Average yield
since 2010: 2.6%

0%

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

1978

1976

-5%

Source: Bloomberg, PIMCO as of 30 April 2024. Past performance is not a guarantee or a reliable indicator of future performance. Chart is provided for illustrative
purposes only and is not indicative of the past or future performance of any PIMCO product. Yield and return are for the Bloomberg U.S. Aggregate Bond Index. It is notpossible to invest directly in an unmanaged index.

Figure 3: Equities screen expensive on an absolute basis and relative to U.S. Treasuries
Value

Percentile

CAPE

As of 30 April 2024:

33.38

93.50%

Real equity yield (1/CAPE)

3.00%

6.50%

30-year real bond yield

2.41%

36.60%

Equity risk premium (equity yield − real bond yield)

0.59%

12.50%

Equity risk premium
10%
8%
6%
4%
2%
0%
-2%

Source: Bloomberg, Robert Shiller online data, Global Financial Data, PIMCO as of 30 April 2024. All value metrics are relative to the S&P 500 Index. CAPE is thecyclically adjusted price/earnings ratio. Real equity yield ratio refers to the average real earnings over the past 10 years divided by the last price. 30-year real bond yieldcorresponds to the yield on 30-year U.S. Treasury Inflation-Protected Securities (TIPS), backfilled with the nominal yield on 30-year U.S. Treasuries minus expected
inflation. To compute inflation expectations, we estimate trend inflation according to Cieslak and Povala (2015) calibration and forecast inflation 30 years ahead.

2023

2018

2013

2008

2003

1998

1993

1988

1983

1978

1973

1968

1963

1958

1953

-4%

8

SECUL AR OUTLOOK • JUNE 2024

Bonds today also embed a term premium that offers a cushion.

Many stronger, more resilient companies generate significant

We expect yield curves to steepen as policy rates decline andcash and don’t rely heavily on financing. Many weaker

the term premium builds (for more, read our February PIMCO

companies tend to need greater ongoing access to credit.

Perspectives, “Back to the Future: Term Premium Poised to

The more productivity-enhancing AI technologies are, theRise Again, With Widespread Asset-Price Implications”), andmore disruptive they are likely to be across companies andwe have a curve steepener as a structural trade.

industries, creating more winners and losers. In the past,

In the wake of its longest-ever inversion, the U.S. yield curve
remains relatively flat. That means investors do not needto take a lot of interest rate risk. We currently find value atthe advent of new technologies has often been followed byboom-bust cycles, creating volatility but also presenting
bottom-up active investment opportunities.

the 5-year part of the yield curve and are wary of potential

We expect increased regulation for banks, which should leadunderperformance of the long end due to fiscal concerns.

to more disintermediation and more money flowing throughActive fixed income is positioned to perform well if there areprivate markets. Our focus remains on liquidity gaps arising

no recessions over our secular horizon and to perform evenfrom banks being pressured to manage capital and meetbetter if there are, with the potential for price appreciation if

regulatory requirements. For example, this bank retrenchment

yields decline, which makes bonds attractive compared withwill likely create opportunities for flexible capital in CRE debt,

cash, in our view.

as we expect large-scale capital needs for asset owners

Global bond markets offer particularly attractive and diverse

facing a wall of loan maturities.

opportunities that investors might be overlooking as a way to

Asset-based lending is a prime example of what we see as anenhance yield without significantly increasing risk. Global yields

attractive and less crowded investment opportunity. Middle-– across DM and EM – have returned to attractive levels. Manymarket corporate lending appears to be in favor within private

economies outside of the U.S. face more fragility yet enjoy

markets, but we believe areas such as consumer lending

better starting fiscal conditions, both supportive of bonds.

offer outstanding long-term fundamentals and value as U.S.

We expect business cycles will be less synchronized, which
will lead to lower correlations across financial markets. The

household leverage has declined (see Figure 4) and housing
markets remain well-supported.

differentiation in central bank policies and market conditions

We would contrast that with the amount of capital now

across regions presents unique opportunities for active, global

concentrated in corporate lending. We are very concerned

investment platforms to capitalize on these discrepancies

about the rapid growth within private, floating-rate markets

and potentially further enhance returns through country andthat may not have been tested through prior default cycles.

security selection. Industrial subsidies and trade policies

These conditions increase the risk of excesses building inpromoting onshoring, friend-shoring, and the energy transitionareas such as technology and direct lending to companies

will likely create both sectoral and national winners and losers,with high leverage and lower credit ratings. Challenges could

presenting further opportunities for active investors.

emerge during our secular time frame.

Given potential volatility around inflation, U.S. Treasury

Given the high potential for returns in the more liquid

Inflation-Protected Securities (TIPS), commodities, and real

segments of the bond market, investors should have aassets offer inflation-hedging properties and higher real rates

high hurdle – in the form of attractive return potential andthan pre-pandemic levels.

strong lender covenants – for giving up liquidity. At today’s
yield levels, the risk-adjusted return potential of broadening

PRIORITIZE CREDIT SELECTION AND LIQUIDITY

exposure to public fixed income markets – such as increasing

While credit spreads appear broadly fair overall, credit andallocations to high quality DM and EM bonds – also

sector selection are poised to become more important over
our secular horizon. Growth in both public and private credit
markets should give active investors with flexible capital more
opportunities during periods of volatility.

compares favorably with the trade-offs involved in extending
into less liquid areas of credit markets.

SECUL AR OUTLOOK • JUNE 2024

9

Figure 4: Household debt has declined, while private corporate lending has grown
U.S. household debt vs. business debt (% GDP)

U.S. corporate debt vs. private credit and loans (% GDP)
Recession

Households

Recession

Total business debt (nonfinancial)
100%
90%
80%

Nonfinancial corporate debt (RHS)

Other loans and advances (private credit, other)
12%

40%

10%

35%

8%

30%

6%

25%

4%

20%

2%

15%

0%

10%

70%

12/2023

12/2015

12/2007

12/1999

12/1991

12/2023

12/2015

12/2007

12/1999

12/1991

12/1983

12/1975

12/196730%

12/198340%

12/197550%

12/1967

60%

Source: Federal Reserve Flow of Funds data, Haver Analytics, PIMCO calculations as of 31 December 2023. Note: Nonfinancial corporate business other loans andadvances category is used as an indicative proxy for assets such as private credit and bank loans.

About our forums
PIMCO is a global leader in active fixed income with deep expertise across public and private markets. Our investment process isanchored by our Secular and Cyclical Economic Forums. Four times a year, our investment professionals from around the world gather todiscuss and debate the state of the global markets and economy and identify the trends that we believe will have important investment
implications. In these wide-reaching discussions, we apply behavioral science practices in an effort to maximize the interchange of ideas,
challenge our assumptions, counter cognitive biases, and generate inclusive insights.
At the Secular Forum, held annually, we focus on the outlook for the next five years, allowing us to position portfolios to benefit
from structural changes and trends in the global economy. Because we believe diverse ideas produce better investment results,
we invite distinguished guest speakers – Nobel laureate economists, policymakers, investors, and historians – who bring valuable,
multidimensional perspectives to our discussions. We also welcome the active participation of the PIMCO Global Advisory Board, a teamof world-renowned experts on economic and political issues.
At the Cyclical Forum, held three times a year, we focus on the outlook for the next six to 12 months, analyzing business cycle dynamics
across major developed and emerging market economies with an eye toward identifying potential changes in monetary and fiscal policies,
market risk premiums, and relative valuations that drive portfolio positioning.

1 According to Newmark Research calculations, as of 12 February 2024.

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SECUL AR OUTLOOK • JUNE 2024

A “safe haven” is an investment that is perceived to be able to retain or increase in value during times of market volatility. Investors seek safe havens to limit their exposure
to losses in the event of market turbulence. All investments contain risk and may lose value.
Past performance is not a guarantee or a reliable indicator of future results.
Investing in the bond market is subject to risks, including market, interest rate, issuer, credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies
are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bondprices generally fall as interest rates rise, and low interest rate environments increase this risk. Reductions in bond counterparty capacity may contribute to decreased
market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed. Investing in foreign-denominated
and/or -domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets.
Mortgage- and asset-backed securities may be sensitive to changes in interest rates, subject to early repayment risk, and while generally supported by a government,
government-agency or private guarantor, there is no assurance that the guarantor will meet its obligations. References to Agency and non-agency mortgage-backed
securities refer to mortgages issued in the United States. Commercial real estate debt is subject to risks that include prepayment, delinquency, foreclosure, risks ofloss, servicing risks and adverse regulatory developments, which risks may be heightened in the case of non-performing loans. Inflation-linked bonds (ILBs) issued by agovernment are fixed income securities whose principal value is periodically adjusted according to the rate of inflation; ILBs decline in value when real interest rates rise.
Treasury Inflation-Protected Securities (TIPS) are ILBs issued by the U.S. government. Commodities contain heightened risk, including market, political, regulatory
and natural conditions, and may not be appropriate for all investors. Equities may decline in value due to both real and perceived general market, economic and industry
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do not reflect actual trading, liquidity constraints, fees, and/or other costs. In addition, references to future results should not be construed as an estimate or promise of
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Statements concerning financial market trends or portfolio strategies are based on current market conditions, which will fluctuate. There is no guarantee that theseinvestment strategies will work under all market conditions or are appropriate for all investors and each investor should evaluate their ability to invest for the longterm, especially during periods of downturn in the market. Investors should consult their investment professional prior to making an investment decision. Outlook andstrategies are subject to change without notice.
The CAPE ratio is a valuation measure that uses real earnings per share (EPS) over a 10-year period to smooth out fluctuations in corporate profits that occur overdifferent periods of a business cycle. Correlation is a statistical measure of how two securities move in relation to each other. The correlation of various indexes or
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who should not rely on this communication but contact their financial adviser. . Since PIMCO Europe Ltd services and products are provided exclusively to professional
clients, the appropriateness of such is always affirmed. | PIMCO Europe GmbH (Company No. 192083, Seidlstr. 24-24a, 80335 Munich, Germany), PIMCO EuropeGmbH Italian Branch (Company No. 10005170963, via Turati nn. 25/27 (angolo via Cavalieri n. 4), 20121 Milano, Italy), PIMCO Europe GmbH Irish Branch (Company
No. 909462, 57B Harcourt Street Dublin D02 F721, Ireland), PIMCO Europe GmbH UK Branch (Company No. FC037712, 11 Baker Street, London W1U 3AH, UK),
PIMCO Europe GmbH Spanish Branch (N.I.F. W2765338E, Paseo de la Castellana 43, Oficina 05-111, 28046 Madrid, Spain) and PIMCO Europe GmbH French Branch(Company No. 918745621 R.C.S. Paris, 50–52 Boulevard Haussmann, 75009 Paris, France) are authorised and regulated by the German Federal Financial Supervisory
Authority (BaFin) (Marie- Curie-Str. 24-28, 60439 Frankfurt am Main) in Germany in accordance with Section 15 of the German Securities Institutions Act (WpIG). The
Italian Branch, Irish Branch, UK Branch, Spanish Branch and French Branch are additionally supervised by: (1) Italian Branch: the Commissione Nazionale per le Società ela Borsa (CONSOB) (Giovanni Battista Martini, 3 - 00198 Rome) in accordance with Article 27 of the Italian Consolidated Financial Act; (2) Irish Branch: the Central Bank of
Ireland (New Wapping Street, North Wall Quay, Dublin 1 D01 F7X3) in accordance with Regulation 43 of the European Union (Markets in Financial Instruments)
Regulations 2017, as amended; (3) UK Branch: the Financial Conduct Authority (FCA) (12 Endeavour Square, London E20 1JN); (4) Spanish Branch: the Comisión Nacionaldel Mercado de Valores (CNMV) (Edison, 4, 28006 Madrid) in accordance with obligations stipulated in articles 168 and 203 to 224, as well as obligations contained inTile V, Section I of the Law on the Securities Market (LSM) and in articles 111, 114 and 117 of Royal Decree 217/2008, respectively and (5) French Branch: ACPR/Banque deFrance (4 Place de Budapest, CS 92459, 75436 Paris Cedex 09) in accordance with Art. 35 of Directive 2014/65/EU on markets in financial instruments and under thesurveillance of ACPR and AMF. The services provided by PIMCO Europe GmbH are available only to professional clients as defined in Section 67 para. 2 German Securities
Trading Act (WpHG). They are not available to individual investors, who should not rely on this communication. According to Art. 56 of Regulation (EU) 565/2017, aninvestment company is entitled to assume that professional clients possess the necessary knowledge and experience to understand the risks associated with therelevant investment services or transactions. Since PIMCO Europe GMBH services and products are provided exclusively to professional clients, the appropriateness ofsuch is always affirmed. | PIMCO (Schweiz) GmbH (registered in Switzerland, Company No. CH-020.4.038.582-2, Brandschenkestrasse 41 Zurich 8002,
Switzerland). According to the Swiss Collective Investment Schemes Act of 23 June 2006 (“CISA”), an investment company is entitled to assume that professional clients
possess the necessary knowledge and experience to understand the risks associated with the relevant investment services or transactions. Since PIMCO (Schweiz)GmbH services and products are provided exclusively to professional clients, the appropriateness of such is always affirmed. The services provided by PIMCO (Schweiz)GmbH are not available to retail investors, who should not rely on this communication but contact their financial adviser. | PIMCO Asia Pte Ltd (8 Marina View, #30-01,
Asia Square Tower 1, Singapore 018960, Registration No. 199804652K) is regulated by the Monetary Authority of Singapore as a holder of a capital markets services
licence and an exempt financial adviser. The asset management services and investment products are not available to persons where provision of such services andproducts is unauthorised. | PIMCO Asia Limited (Suite 2201, 22nd Floor, Two International Finance Centre, No. 8 Finance Street, Central, Hong Kong) is licensed by the
Securities and Futures Commission for Types 1, 4 and 9 regulated activities under the Securities and Futures Ordinance. PIMCO Asia Limited is registered as a crossborder discretionary investment manager with the Financial Supervisory Commission of Korea (Registration No. 08-02-307). The asset management services andinvestment products are not available to persons where provision of such services and products is unauthorised. | PIMCO Investment Management (Shanghai) Limited.
Office address: Suite 7204, Shanghai Tower, 479 Lujiazui Ring Road, Pudong, Shanghai 200120, China (Unified social credit code: 91310115MA1K41MU72) is registeredwith Asset Management Association of China as Private Fund Manager (Registration No. P1071502, Type: Other). | PIMCO Australia Pty Ltd ABN 54 084 280 508, AFSL
246862. This publication has been prepared without taking into account the objectives, financial situation or needs of investors. Before making an investment decision,
investors should obtain professional advice and consider whether the information contained herein is appropriate having regard to their objectives, financial situation andneeds. To the extent it involves Pacific Investment Management Co LLC (PIMCO LLC) providing financial services to wholesale clients, PIMCO LLC is exempt from therequirement to hold an Australian financial services licence in respect of financial services provided to wholesale clients in Australia. PIMCO LLC is regulated by the
Securities and Exchange Commission under US laws, which differ from Australian laws. | PIMCO Japan Ltd, Financial Instruments Business Registration Number is
Director of Kanto Local Finance Bureau (Financial Instruments Firm) No. 382. PIMCO Japan Ltd is a member of Japan Investment Advisers Association, The Investment
Trusts Association, Japan and Type II Financial Instruments Firms Association. All investments contain risk. There is no guarantee that the principal amount of theinvestment will be preserved, or that a certain return will be realized; the investment could suffer a loss. All profits and losses incur to the investor. The amounts,
maximum amounts and calculation methodologies of each type of fee and expense and their total amounts will vary depending on the investment strategy, the status ofinvestment performance, period of management and outstanding balance of assets and thus such fees and expenses cannot be set forth herein. | PIMCO Taiwan Limited
is an independently operated and managed company. The reference number of business license of the company approved by the competent authority is (112) Jin Guan
Tou Gu Xin Zi No. 015 . The registered address of the company is 40F., No.68, Sec. 5, Zhongxiao East Rd., Xinyi District, Taipei City 110, Taiwan (R.O.C.), and the telephone
number is +886 2 8729-5500. | PIMCO Canada Corp. (199 Bay Street, Suite 2050, Commerce Court Station, P.O. Box 363, Toronto, ON, M5L 1G2) services and products
may only be available in certain provinces or territories of Canada and only through dealers authorized for that purpose. | Note to Readers in Colombia: This document isprovided through the representative office of Pacific Investment Management Company LLC located at Carrera 7 No. 71-52 TB Piso 9, Bogota D.C. (Promoción y oferta delos negocios y servicios del mercado de valores por parte de Pacific Investment Management Company LLC, representada en Colombia.). Note to Readers in Brazil:
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