PIMCO CIO Warns Of 'Hard Landing' For UK Economy
Portfolio Pulse from Surbhi Jain
PIMCO CIO Daniel Ivascyn has expressed concerns about a potential 'hard landing' for the UK economy, predicting a significant downturn next year. He sees more risk in the UK and Europe compared to the resilient US economy. Ivascyn favors UK government bonds over US ones, anticipating economic hardship in the UK. The UK economy contracted in October, and bond yields have fallen, which is good for bondholders but negative for equities. Investors in the iShares MSCI United Kingdom ETF (EWU) should monitor these developments. Ivascyn also highlighted opportunities in global bond investing, mentioning ETFs that track international bonds, including PICB, PGHY, CRDT, and IHY. In contrast, the US economy's growth is reflected in the SPDR S&P 500 ETF (SPY), which has outperformed EWU over the past year.
December 19, 2023 | 6:05 pm
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NEGATIVE IMPACT
The iShares MSCI United Kingdom ETF (EWU) may face headwinds due to the predicted economic downturn in the UK, which could negatively impact equity prices.
Given the negative outlook for the UK economy, equities in the region, including those held by EWU, are likely to be adversely affected in the short term.
CONFIDENCE 75
IMPORTANCE 70
RELEVANCE 80
POSITIVE IMPACT
The Simplify Opportunistic Income ETF (CRDT) may gain traction as it offers exposure to international bonds, which could be appealing given the UK's economic forecast.
CRDT could see increased interest as investors may consider diversifying into international bonds in light of the UK's economic challenges.
CONFIDENCE 65
IMPORTANCE 50
RELEVANCE 50
POSITIVE IMPACT
The VanEck International High Yield Bond ETF (IHY) could potentially benefit from the increased interest in international bonds as the UK economy faces a downturn.
IHY may experience positive effects as investors look for yield in international markets, away from the potential downturn in the UK.
CONFIDENCE 65
IMPORTANCE 50
RELEVANCE 50
POSITIVE IMPACT
The Invesco Global ex-US High Yield Corporate Bond ETF (PGHY) may see a positive impact as investors seek opportunities in international high-yield bonds amid UK economic concerns.
PGHY could benefit from a flight to value in international bonds as investors look for alternatives to the troubled UK economy.
CONFIDENCE 65
IMPORTANCE 50
RELEVANCE 50
POSITIVE IMPACT
The Invesco International Corporate Bond ETF (PICB), which tracks European bonds, may benefit from the shift towards bond investment due to economic uncertainty in the UK and Europe.
The expected downturn in the UK and Europe could lead to lower bond yields, which is generally positive for existing bondholders, potentially benefiting PICB.
CONFIDENCE 70
IMPORTANCE 60
RELEVANCE 60
POSITIVE IMPACT
The SPDR S&P 500 ETF (SPY) reflects the resilience of the US economy, which contrasts with the UK's negative outlook, potentially making it a more attractive investment.
SPY's performance could continue to be favorable as it represents the robust US economy, which is currently outperforming the UK and Europe.
CONFIDENCE 75
IMPORTANCE 60
RELEVANCE 70