2023-07-03 11:16:37
Daniel Ivascyn, chief investment officer of Pacific Investment Management Company (PIMCO), said in an interview on Sunday (2nd) that the company is preparing for a more pessimistic “hard currency” than other markets expect as central banks prepare to continue raising interest rates to fight inflation. Landing” preparations.
“The more motivated people are to tighten policy, the greater the lagged uncertainty and the greater the risk of a more extreme economic outlook,” Ivascyn said.
He pointed out that in the past, when interest rates rose, the impact was usually felt with a lag of five or six quarters, which has become the norm. In addition, markets may remain overconfident in the quality of the central bank’s decision-making and its ability to deliver good outcomes.
Ivascyn warns that this crisis may be different from previous ones. The central bank may be less willing to provide support because of concerns that it will exacerbate price increases. As a result, many of the risks have been transferred to the private market. The rate of deterioration in credit valuations may be slowed, but it cannot be stopped.
Stanley Druckenmiller, a former strategist and legendary manager of Soros, a financial tycoon, also predicted a hard landing for the US economy. He predicts a potential 20% to 30% decline in corporate profits, a plunge in commercial real estate values and an increase in bankruptcies.
However, Jan Hatzius, chief economist at Goldman Sachs Group Inc., previously said that U.S. inflation is expected to fall sharply in the coming months as gains in rents and commodity prices slow.
Hatzius said U.S. wage growth is slowing and the labor market is coming into better balance as job vacancies shrink and quits fall. “I do feel pretty good regarding the soft landing expectations,” he said. “We’re on track for below-average trend but still positive growth.”
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