PIMCO, a leading global fixed-income manager overseeing over $1.8 trillion, has released a report advising investors to reduce their exposure to the US dollar and explore opportunities in long-duration bonds from Europe, emerging markets, Japan, and the UK. The report highlights the changing macroeconomic landscape and suggests that the US's reliance on the dollar as a global reserve currency may not be sustainable.
The report notes that shifts in US trade policies are prompting investors to reassess their assumptions about the US investment environment. Recent declines in the US dollar, stocks, and bonds are more typical in emerging markets. PIMCO warns that the US's privileged status, with the dollar as a global reserve currency and Treasuries as key reserve assets, could be challenged if global capital inflows weaken.
Additionally, PIMCO points out that the US's economic model, which has relied on consumer spending and capital account surpluses, may face difficulties due to tariffs and fiscal imbalances. The Federal Reserve may need to navigate a complex path of interest rates to balance inflation expectations with subdued growth prospects.
In a more multipolar world, PIMCO suggests that diversified investments and a reduced reliance on a single reserve currency are crucial for safeguarding national security interests and ensuring stable returns.
