Trump Floats Cutting China Tariffs ‘Substantially' in Trade Deal
The Pulse with Francine Lacqua
Today's guests: Mohit Mittal, Pimco; Fatih Birol, International Energy Agency Executive Director; Bill Browder, Hermitage Captal, Co-founder & CEO (Source: Bloomberg)
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Bloomberg
2 hours ago
- Bloomberg
Sperling Sees Enduring US-China Trade Tensions, Volatility Ahead
Trade tensions between the U.S. and China are unlikely to ease soon despite a recent thaw on tariffs, according to Gene Sperling of Pacific Investment Management Co., who warns market volatility is likely to persist. Sperling, a former director of the National Economic Council, a White House unit that coordinates administration policy, cautioned the recent truce between the world's biggest economies failed to address underlying structural issues. These include intellectual property rights, technology transfers and market access.
Yahoo
3 hours ago
- Yahoo
Stocks haven't been this expensive relative to bonds in almost 25 years. Is a market downturn next?
Stocks haven't looked this expensive relative to bonds since the end of the Clinton administration ago nearly 25 years ago. Yet bonds also look better than they have for a long time. That's a key takeaway of a new report from bond giant Pimco, which argues that investors should be positioned in high-quality bonds as the reordering of global trade and alliances in President Trump's second term looks likely to stick around. Fund manager who sold Tesla, just in time, says investors are overlooking these tech bargains I'm in my 80s and have 2 kids. How do I choose between them to be my executor? My friend, 83, wants to add me to his bank account to pay his bills. What could go wrong? 'It might be another Apple or Microsoft': My wife invested $100K in one stock and it exploded 1,500%. Do we sell? The S&P 500 is nearly back to record highs, but investors shouldn't get too comfortable 'In short, the traditional world order — in which economics shaped politics — has been turned on its head,' according to a new five-year Pimco outlook co-written by Richard Clarida, now a global economic adviser at Pimco and formerly a Federal Reserve vice chair from 2018 to 2022. 'Politics is now driving economics, especially in the U.S. and increasingly in how other countries respond.' Clarida's team said. With that backdrop, Pimco thinks investors should start 'seizing the yield advantage in high-quality bonds rather than chasing equities at elevated valuations.' The team also pointed out that the 'equity risk premium' now stands at zero, which was the case only two other times in the past 70 years: in 1987 and in 1996-2001. Pimco arrived at its 0.2% equity risk premium by subtracting inflation-adjusted 30-year Treasury bond yields from cyclically adjusted price to earnings. Following the September 1987 episode of a zero equity risk premium, the stock market fell nearly 25%, while 30-year real bond yields dropped about 80 basis points, according to the report. Roughly a decade later, stocks plunged almost 40% after a flat-to-negative equity risk premium took hold from December 1999 to February 2003. 'In that same time, 30-year real bond yields fell by about 200 [basis points],' the Pimco report said. Longer-duration Treasury yields have been rising under the second Trump administration, with recent focus on the large U.S. fiscal deficit and additional issuance likely need to fund Republicans' massive tax-and-spending bill, which still sits in the Senate. The 10-year Treasury yield BX:TMUBMUSD10Y on Tuesday was at 4.47%, while the 30-year yield BX:TMUBMUSD30Y was close to 4.94%, according to FactSet data — near the psychologically important 5% level. Tariff uncertainty looks poised to keep the Fed on hold in terms of resuming interest-rate cuts for a while. A concern has been that the economy could stumble under the weight of several years of higher borrowing costs, which could prompt a flight to safety in bonds and spur the Fed to cut rates to help rescue the economy. Steep Fed rate cuts could make today's higher bond yields more scarce and valuable. Stocks, on the other hand, were back on the doorstep of record territory Tuesday, after staging a dramatic recovery from their tariff-induced selloff. The S&P 500 index SPX was up 0.4%, or about 2% off its record of 6,144.15 set on Feb. 19, according to Dow Jones Market Data. Read: Worried about long-term bond yields, this strategist says overweight cash 'I prepaid our mom's rent for a year': My sister is a millionaire and never helps our mother. How do I cut her out of her will? 'The situation is extreme': I'm 65 and leaving my estate to only one grandchild. Can the others contest my will? My life partner is 18 years my senior. He wants to leave his $4.5 million fortune to me — not his two kids. Do we tell them? I bought my mother-in-law a condo — and she took out a $30,000 car loan. Now she refuses to get a roommate. Value investing is finally excelling again in 2025 — but there is one catch for Americans Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
5 hours ago
- Yahoo
Stock valuations are hovering at levels that have historically preceded major corrections, Pimco warns
Bond giant Pimco warns that equity valuations are historically high. The current S&P 500 CAPE ratio is in the 94th percentile of all-time. Equity risk premium is also around as low as it was before the 1987 crash and the dot-com bust. It's been a tranquil few weeks for financial markets as investors wait to see how the US economy holds up under President Donald Trump's tariff regime. But things could change quickly, Pimco warned in a note on Tuesday. By several measures, stock valuations are sitting at levels historically seen before big corrections, the $2 trillion asset manager said in a note written by global economic advisor Richard Clarida, chief investment officer of Fixed Income Andrew Balls, and group chief investment officer Dan Ivascyn. The first gauge they cited is the Shiller cyclically-adjusted price-to-earnings ratio, which compares the current S&P 500 price to a 10-year moving average of its earnings. Its current level of around 36x earnings is in the all-time 94th percentile. The second measure is the equity risk premium, or the projected assumed returns of stocks over 10-year Treasurys based on current valuations. Sitting near zero, the ERP has only been this low 10% of the time. When it's been this low in the past, significant stock-market declines have followed — see the 1987 crash and the dot-com bust in 2000. "A mean reversion to a higher equity risk premium typically involves a bond rally, an equity sell-off, or both," the note said. "The same chart shows two prior times when the premium was zero or negative: in 1987 and in 1996—2001." It continued: "Following the zero equity risk premium in September 1987, the stock market declined by almost 25%, while 30-year real bond yields fell by 80 basis points (bps). In December 1999, the equity risk premium reached its minimum level during the chart period, preceding an equity drawdown of almost 40% that ended in February 2003. In that same time, 30-year real bond yields fell by about 200 bps." High stock valuations make it likely that fixed-income assets outperform stocks in the years ahead, the note said. With yields high and rate cuts probably on the way, investors can clip an attractive coupon and have a good chance of seeing appreciation in the price of bonds down the road. Valuations themselves are poor predictors of near-term stock price action, but if a negative catalyst comes along — a bad jobs report or rising inflation — high valuations leave the market vulnerable to more pronounced downside. Read the original article on Business Insider
