PIMCO's Sonali Pier on what to watch in fixed income
Sonali Pier, PIMCO managing director and portfolio manager, joins CNBC's 'Closing Bell' to discuss outlooks on bonds, whether the economy can absorb higher yields, and more.
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Buyers' Strike Rocks US Long Bond as DoubleLine, Pimco Stay Away
For DoubleLine Capital, there are two approaches to consider when it comes to 30-year US Treasuries: either avoid them, to the degree they can, or outright short them. Wary of America's swelling federal budget gap and growing debt burden, the money manager led by Jeffrey Gundlach is part of a wave of investment firms — including Pacific Investment Management Co. and TCW Group Inc. — that are steering away from the longest-dated US government bonds in favor of shorter maturities that carry less interest-rate risk but still offer a decent yield.
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As the TACO trade goes viral, another is gaining traction: 'Anywhere But The USA'
Seesawing trade policies , proposed foreign capital taxes and concerns over U.S. fiscal spending have propelled some investors to "Sell America" and given rise to a new trade: "Anywhere But the USA." Market participants have been scrambling to keep up with flip-flopping White House tariffs policy, a dollar selloff , a sharp rise in U.S. Treasury yields and volatile Wall Street stocks . It comes after the TACO — or "Trump Always Chickens Out" — trade ruffled feathers last week, as investors bet that U.S. President Donald Trump will ease or postpone steep tariffs despite threats to the contrary. Now, market participants say the hot trade is "Anywhere But the USA" — or ABUSA — amid what investment manager Ninety One's Alan Siow signaled was a "comfortable consensus" that U.S. exceptionalism was beginning to fade. "The 'Anywhere But USA' trade isn't contrarian — it's a recalibration toward global balance, cyclical recovery, and multi-polar growth," Siow, co-head of emerging market corporate debt, told CNBC. Over the past decade, he added, a widespread preference for U.S. assets had been "underpinned by secular strength in the [U.S. dollar] as a base currency." But confidence in the greenback has wavered in recent weeks. The U.S. dollar index has shed more than 8% since the beginning of the year, with the dollar now on course for its fifth consecutive month of losses . "Against a backdrop of mounting fiscal imbalances, the recent spike in policy volatility and resulting geopolitical polarization have caused U.S. market dominance to lose some of its luster," Siow explained. "At the same time, other global market destinations — [like emerging markets], Europe, Japan — offer improving fundamentals, attractive risk/reward profiles and are broadly under-owned." He added that he was advising investors to consider whether index-beating returns are now more likely to come from global diversification than from continued U.S. concentration. Rami Cassis, founder of London's Parabellum Investments, told CNBC by phone that he was seeing a shift in attitude toward investing in the U.S. — but that this went deeper than simply seeking out the biggest returns. "I'm seeing a lot of, not quite animosity, but I can't think of a better word for it," he explained. "I think it's quite specific to the current administration. I think the capital flows out of the U.S. are driven by the apparent unpredictability of the current administration, [but] I think it's supported by ideology." Tariffs, Trump's approach to the war in Ukraine war , perceptions around the administration's stance on LGBT rights and other controversial policies were influencing some people's decisions about putting money in America, Cassis told CNBC. "It's become quite emotive," he added. "Nobody wants to invest in an environment where the government might change its mind overnight. [And] what would ordinarily be a purely objective and rational commercial decision, is now being supported by a level of emotion that's been introduced by some of the behaviors and policies that have come out of the current administration." Trump's policies have sparked international consumer boycotts of American products and a fall in global travelers to the United States. David Rosenstrock, director of financial planning and investments at New York-based Wharton Wealth Planning, told CNBC by email that he was seeing demand from clients to allocate their assets beyond the United States. The shift is "partly driven by concerns over market volatility in the U.S., uncertainty regarding trade and other policies, interest rates, and relatively weaker performance compared to global counterparts," he added. Where are the opportunities beyond Wall Street? Rosenstrock said his clients were considering diversifying to markets including Europe, emerging markets, and specific countries such as Japan and India. But he cautioned that the trend could stall or reverse in the future. "U.S. stocks have become more attractive to international investors as the U.S. dollar has weakened," he said. "As a result, for international investors, the cost of purchasing U.S. stocks in their local currency has decreased in some instances by as much as 10%." Parabellum's Cassis told CNBC that, "Europe, for the first time in a long time, might be a proper destination" for investment. European stocks have seen broad gains this year, amid broadly falling inflation , a historic shift on fiscal spending in Germany, and a commitment to ramp up defense spending across the region. The pan-European Stoxx 600 index has gained around 7.7% since the beginning of the year, while the euro has so far gained over 10% against the dollar in 2025. Meanwhile, the European Stoxx Aerospace and Defense index has soared by almost 50% this year, with bullish sentiment rising after the EU pledged to mobilize as much as 800 billion euros to invest in regional security. Chris Clement, senior portfolio manager at BRI Wealth Management, agreed that Europe-based investment alternatives to the U.S. were now looking more attractive. "European and U.K. equity markets trade at significant discounts to the U.S. and are now having the spotlight shone upon them," he said. "Another alternative for safe-haven assets might be the gilt market." Long-dated U.K. government bonds, known as gilts, logged major sell-offs earlier this year, which some traders labeled as a "nice opportunity ." Emerging markets Beyond Europe, the spotlight is back on emerging markets. Parabellum's Cassis noted that, for those considering allocating funds to the region, India looked attractive. "There's been a lot of economic activity and policies around trying to encourage foreign capital," Cassis told CNBC. "I think India is very likely a destination of some of the [diversifying] funds, depending on the investor's risk [tolerance]." The world's fifth-largest economy expanded by a hotter-than-expected 7.4% in the March quarter. Brian Mangwiro, managing director at Barings, also noted the increasing strength of emerging market investments. "We particularly see value in EM debt, sovereigns and corporates, and flows are starting to reflect this view," he said."The asset class also tends to perform well in a weak U.S. dollar environment." Mangwiro echoed the view that demand from the global investment manager's clients has begun to diversify away from the United States. "Within ETFs, flows into the 'Global ex-US' segment picked up post 'Liberation Day', both for equities and fixed income. US flows have flatlined," he said, citing policy uncertainty, an unsustainable fiscal trajectory and fears of significant dollar weakness as driving the moves. However, he emphasized that Barings was not seeing wholesale de-risking from U.S. assets, but a diversification away from positions that were heavily U.S.-leaning over the past five years.
CNBC
8 hours ago
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The global economy faces many headwinds, but the aviation industry is expected to defy them
The global economy may be facing an uncertain 2025 in light of trade tensions and geopolitical conflicts, but there's a bright spot that investors can take solace in: aviation. The profitability of the aviation industry is expected to improve in 2025, despite global gross domestic product growth being forecast to drop to 2.5% in 2025 from 3.3% in 2024, according to the International Air Transport Association. In a report released on Monday, the IATA said revenue, operating profits and net profits of the industry are expected to increase from 2024, although some of those were lower than projections made in December. For example, net profits for the industry are projected at $36 billion for 2025, up from the $32.4 billion earned in 2024, but slightly lower than the December projection of $36.6 billion. The aviation industry's net profit margin is also forecast to rise to 3.7% in 2025, from 3.4% the previous year. Total revenues are projected to hit a record high of $979 billion, 1.3% higher than the previous year, but down from the $1 trillion in its last forecast. The IATA attributed the better results mainly to two factors: lower jet fuel costs and greater efficiency. It expects passenger load factors will reach an all-time high in 2025 with a full-year average of 84%, "as fleet expansion and modernization remains challenging amid supply chain failures in the aerospace sector." PLF shows how efficiently an airline is filling its seats. Jet fuel costs are expected to average $86 per barrel in 2025, down from $99 in 2024, the IATA noted, saying it will translate into a total fuel bill of $236 billion, $25 billion lower than the $261 billion incurred in 2024. "Recent financial data show minimal fuel hedging activity over the past year, indicating that airlines will generally benefit from the reduced fuel cost. It is not expected that fuel will be impacted by trade tensions," IATA said. Airline CEOs told CNBC that airlines are holding up despite the uncertainty. Air India CEO Campbell Wilson told CNBC's Monica Pitrelli at the World Air Transport Summit over the weekend that 2025 has been "a year of surprises" for the airline, "whether it's politics, tariffs, geopolitics, [or] closer to home, some conflict issues."India and Pakistan recently closed their airspace to each other's aircraft after military strikes carried out by both sides in May. Pakistan planes are banned from Indian airspace till June 23, and Indian planes are barred from Pakistan till June 24. "Uncertainty is not helpful for business, but the underlying fundamentals of this market ... and the upside we see ahead of Air India is driving us forward, because we think there's massive opportunity to be realized," Wilson added. He said India is the third-largest air travel market in the world, and estimated that it's growing at an annual growth rate of 8% to 10%. "So if Indians start traveling... at the intensity of China, it's going to absolutely explode in volume internationally," he said. Adrian Neuhauser, president and CEO of Colombian flag carrier Avianca, said in an interview Sunday "When the world sneezes in any way ... Airlines just get sick very quickly."However, he said, Avianca's passenger load factors are still holding up and revenue has improved. "So the concern is there, but as of today, we're still seeing the numbers be there." North America is expected to generate the highest absolute profit among all regions in 2025, and the Asia-Pacific region is set to see the largest demand growth in 2025, with revenue per passenger kilometer projected to grow 9% year on year, the IATA said. Revenue passenger kilometers, or RPK, is a measure of the volume of passengers carried by an airline. The metric is used to assess airline performance and passenger demand. The IATA said that "if an airline sees a consistent increase in RPKs on a particular route over several months, this might prompt the carrier to increase flight frequency or deploy larger aircraft to meet growing demand — potentially boosting revenue and market share." It attributed strong passenger demand in the Asia-Pacific to the relaxation of visa requirements in several Asian countries, especially China, Vietnam, Malaysia and IATA did note, however, that the economic landscape poses some challenges, with the GDP forecast for the region, particularly China, having been lowered.
