By Davide Barbuscia
NEW YORK (Reuters) – Equity and fixed income markets may be too optimistic on how quickly central banks will cut interest rates and underestimate the risk of an economic downturn or of inflation reaccelerating, U.S. bond giant PIMCO said on Wednesday.
The asset manager over the past year has shifted out of lower-rated credit into higher-quality, securitized assets that could gain value and prove more resilient in a range of economic scenarios, PIMCO’s group chief investment officer, Dan Ivascyn, said in a note.
PIMCO expects inflation to continue to decline and that central banks, including the Federal Reserve, will cut rates this year, but said markets were too optimistic on how quickly the process will unfold.
“We think the market is rightly suggesting that a soft landing in the U.S. is possible,” Ivascyn said, referring to an economic scenario where the Fed manages to bring inflation down without…
