THE “NEW” NORMAL
As PIMCO´s managers say: ” We are heading into what we call the New Normal, which is a period of time in which economies grow very slowly as opposed to growing like weeds, the way children do; in which profits are relatively static; in which the government plays a significant role in terms of deficits and reregulation and control of the economy; in which the consumer stops shopping until he drops and begins, as they do in Japan (to be a little ghoulish), starts saving to the grave.”
The investment implications of this New Normal evolution cannot easily be modeled econometrically, quantitatively, or statistically. The applicable word in New Normal is, of course, “new.”
The successful investor during this transition will be one with common sense and importantly the powers of intuition, observation, and the willingness to accept uncertain outcomes.
As of now, PIMCO observes that the highest probabilities favor the following strategic conclusions:
- Global policy rates will remain low for extended periods of time.
- The extent and duration of quantitative easing, term financing and fiscal stimulation efforts are keys to future investment returns across a multitude of asset categories, both domestically and globally.
- Investors should continue to anticipate and, if necessary, shake hands with government policies, utilizing leverage and/or guarantees to their benefit.
- Asia and Asian-connected economies (Australia, Brazil) will dominate future global growth.
- The dollar is vulnerable on a long-term basis.
Let´s see if Governments Bureaucrats start getting it and understand that the “good old days” are gone for a long,long time…
