Risk Off, Yield On

PIMCO

Research

6 Pages

PIMCO makes the case that higher yields have changed the playbook, bringing bonds back as a serious portfolio option. They stay cautious on risk assets while inflation is sticky and growth is slowing, arguing equity earnings still look too optimistic. One tension worth watching: markets may start pricing a soft landing even as profits reset lower.

Date published: November 2022

Key Takeaways

Bonds back: Higher starting yields improve expected returns and recession resilience in core fixed income.
Equity caution: Prefers quality and defensives while margins and earnings expectations adjust downward.
Re risk signals: Watches for peaking inflation, stable policy rates, and credible earnings revisions before adding risk.
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