Cowart continued: “Weighing the data, we believe the most probable scenario for the US economy is slow but sustainable growth over the next few years.”
In a report by PIMCO authored by Andrew Balls, Dan Ivascyn and Rich Clarida, they outline why the global economy has avoided another recession so far. According to their study, it’s only because of zero or negative policy rates in many countries; the liquidity administered by major central banks via quantitative easing and the debt-financed investment boom in China and some other emerging market economies.
The multinational investment firm’s current base case is that the status quo continues and evolves gradually for the next three to five years.
But it also concedes that in the absence of structural reforms, we are approaching the limits of central bank policy. At the same time, the increasingly experimental policy is creating greater uncertainty and stretching valuations.
