China Property Woes Deepen With Vanke Slump, Country Garden Halt
One of China’s biggest property firms delayed its earnings report while another posted a record profit decline as the nation’s real estate crisis shows no signs of easing.
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One of China’s biggest property firms delayed its earnings report while another posted a record profit decline as the nation’s real estate crisis shows no signs of easing.
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Oct 20, 2021
Bloomberg News
,(Bloomberg) -- If you think financial markets have been strange the past 18 months, just wait. What lies ahead is an unfamiliar macroeconomic environment that’s undergoing dramatic changes, says Pacific Investment Management Co.
The firm released a report Wednesday warning that over the next five years the global economy will see “a more uncertain and uneven growth and inflation environment with plenty of pitfalls for policymakers.”
Higher macroeconomic and market volatility will likely mean lower returns across fixed-income and equity markets, according to the manager, which oversees around $2.2 trillion in assets. But while overall capital market returns will likely be lower, increased volatility should spell opportunity for active fund managers, wrote Pimco.
Markets are already bracing for the prospect that major central banks will soon begin withdrawing the emergency support provided during the Covid pandemic, with the Federal Reserve widely expected to start dialing back asset-buying next month, while inflation risks remain a major source of disquiet.
Amid this, a number of more long-term structural changes are coming into play, including a global shift toward using more green energy, a bigger embrace of automation technologies and increased attention on global wealth inequalities.
Disruptive trends and more interventionist policies may make economic cycles shorter in length but bigger in amplitude, and with more variation between countries, said the report from Pimco’s Joachim Fels, Andrew Balls and Daniel Ivascyn. Periods of both much higher and much lower inflation are more probable, they wrote.
The world’s markets face “more uncertain, volatile, and divergent growth and inflation than in the New Normal decade leading up to the pandemic,” the report said.
Unprecedented support by central banks has inflated asset prices and may have contributed to medium-term financial market vulnerabilities, the money manager said. Pimco expects low central bank rates to continue and that they will anchor fixed-income markets globally.
“Elevated debt levels and highly financialized economies as measured by wealth-to-income ratios will likely constrain central banks’ ability to push interest rates aggressively higher without causing severe economic pain,” it said.
Here are some opportunities Pimco expects to find in the market:
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