The New Neutral
We see the world’s economies likely converging to modest trend growth rates over the next few years. This New Neutral reflects global aggregate demand that is still insufficient to absorb bountiful aggregate supply, five years after the financial crisis and despite extraordinary monetary policies. Such is our conclusion from the PIMCO 2014 Secular Forum, during which investment professionals from our 13 global offices gathered for an examination of critical factors affecting economies and markets over the next three to five years. In this year’s Secular Outlook essay detailing that and other conclusions from the Forum, Richard Clarida shares our long-term global outlook and Bill Gross distills the investment implications. In defining The New Neutral, a few key points from the essay are:
Total global debt outstanding remains at peak levels around the globe, and this combined with subpar growth is constraining central bankers.
- The prospects for U.S. growth over the next three to five years encompass a wider range of optimistic outcomes than do prospects for other major economies, though growth at pre-crisis trends is unlikely for years to come.
- For investors, there appears to be more risk than reward on the horizon. However, if The New Neutral plays out, the risk may be lower than expected as growth trends, while slower, are more stable.
Download the Secular Outlook by Richard Clarida with Investment Implications by Bill Gross.