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Leading US investment firm PIMCO is forecasting a 60 percent chance of another global recession in the next few years. Although inflation rates will remain stable in the medium-term, the global economy is feared to plunge to new record lows.
In a research note, portfolio manager and PIMCO managing director Saumil Parikh wrote, “Given that the last global recession was four years ago, and also given that the global economy is significantly more indebted today than it was four years ago, we believe there is now a greater than 60 percent probability that we will experience another global recession in the next three to five years.”
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Characterized by very low growth rates in many countries around the world, the decline of robust financial activities in Europe, and the growth in trade and currency tensions between developed markets, the anticipated global economic disaster will force investors of all sizes to temper their return expectations.
The US economy grew at a 2.4 percent annual pace in the first quarter of the year—a remarkable sign of recovery from recession. In contrast, the 17 Eurozone nations have remained stagnant. The region’s economy contracted for a record sixth consecutive quarter at the start of 2013 and is believed to be the epicenter of the approaching recession. Even China, the world’s most resilient major economy, has fallen prey to fluctuating growth rates over the last few years, causing the IMF to lower its forecast on the country’s economic projections.
PIMCO’s founder and co-chief investment officer, Bill Gross, argued that while the global central banks’ policies may have pacified some economies, they never completely succeeded in returning them to stable growth rates.
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I am Dana Ray Reynolds, a Los Angeles, California-based financial planner specializing in risk management and tax planning. Visit my blog for more insights into business, finance, and investing.
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