Economic and Market Commentary

October 2022 Update from the Australia Trade Floor

Rob Mead explains how investors should prepare for possible recession.

More from this section

Read Transcript

Text on screen: John Valtwies, Account Manager

Valtwies: Rob, it's been a remarkable month. We've seen some incredible moves in markets, some policy U-turns. What does all this mean for Australia in particular the RBA's decision to hike less than most were expecting?

Text on screen: Rob Mead, Co-head of APAC Portfolio Management and Head of Australia

Mead: Yes John, we've definitely seen some volatility in the past few weeks. I guess it all started with the interplay between fiscal and monetary policy in the UK and we saw the incredible bouts of volatility there.

More recently in our own backyard, the RBA came out with an incredibly upbeat statement about the Australian economy: Wages are growing, unemployment rate may go further down, still confident about people's buffers in terms of their savings, Terms of trade very supportive, in fact inflation expectations are going up even further in terms of the forecast.

But yet [the RBA] felt that 25 basis points was enough even though the market was pricing 50.

We're still thinking that through but I think the most important takeaway is that the terminal rate still needs to be well above neutral. At 2.60 we're in the neutral zone. We think there's more rate hikes to come and to use the RBA's words, navigating this narrow path and keeping the economy on an even keel is becoming that much more complicated and difficult.

Valtwies: Rob, you've talked about this narrow path, as the RBA also stated. How do investors think about navigating this environment?

Mead: Yes, I think the way to think about it would be 3.5% as a terminal rate would be, we think, about the minimum required given that inflationary backdrop and given that inflation in Australia still hasn't peaked. If we have to go all the way up to 4% or maybe north of 4%, we're talking about recession.

And so for investors that are thinking about growth outcomes they should be preparing their portfolio allocations for scenarios that may very well include a recession. So that means much more about moving back towards structural targets, whether that be 70-30 or 60-40 in terms of that risk asset versus defensive assets split. It means being very cautious around earnings expectations. It means being cautious around illiquidity and especially investing in highly levered structures.

So all of these things suggest that with bond yields where they are, the hurdle rate for investing in riskier assets is much higher, especially when you're thinking about 6% plus potential returns from fairly low risk investment opportunities. That should really calibrate the rest of a portfolio allocation.

Valtwies: Well, thanks, Rob, and thank you for joining us. To learn more about our views and analysis on markets, please visit


Filters: Reset All


Close Filters Dropdown
  • Tags


  • Category


    Bond by Bond
    Economic and Market Commentary
    Investment Strategies
    PIMCO Foundation
    PIMCO Education
    View from the Investment Committee
    View From the Trade Floor
  • Order By


    Most Recent
() filters applied

Multimedia Finder

Filter By:
  • Bond by Bond
  • Careers
  • Economic and Market Commentary
  • Investment Strategies
  • PIMCO Foundation
  • PIMCO Education
  • View from the Investment Committee
  • View From the Trade Floor
  • Viewpoints
  • Understanding Investing
  • A
  • B
  • C
  • D
  • E
  • F
  • G
  • H
  • I
  • K
  • M
  • N
  • P
  • R
  • S
  • T
  • V
  • W
  • Y
  • Z
Berdibek Ahmedov
Product Strategist
Andrew Balls
CIO Global Fixed Income
Justin Blesy
Asset Allocation Strategist
Meredith Block
ESG Research Analyst
Adam Bowe
Portfolio Manager, Australia
Allison Boxer
David L. Braun
Portfolio Manager
Jelle Brons
Portfolio Manager, Global and U.S. Investment Grade Credit
Nathaniel Brown
Director of the PIMCO Foundation
Erin Browne
Portfolio Manager, Asset Allocation
Grover Burthey
Portfolio Manager, ESG
Libby Cantrill
U.S. Public Policy
Yishan Cao
Credit Research Analyst
Kenneth Chambers
Fixed Income Strategist
Stephen Chang
Portfolio Manager, Asia
Richard Clarida
Global Economic Advisor
Mathieu Clavel
Portfolio Manager, Alternative Credit
Tony Crescenzi
Portfolio Manager, Market Strategist
Harin de Silva
Portfolio Manager, Special Situations
Pramol Dhawan
Portfolio Manager
Matt Dorsten
Portfolio Manager, Quantitative Strategy
Anna Dragesic
Head of Global Credit Product Strategies
Jason Duko
Portfolio Manager
Devin Ekberg
Senior Consultant, Advisor Education
David Erdonmez
Account Manager
David Fisher
Co-Head of Strategic Accounts, U.S. Global Wealth Management
David Forgash
Portfolio Manager
Preeyam Gandhi
Max Gelb
Product Strategist
Nick Granger
Portfolio Manager, Quantitative Analytics
Adam Gubner
Portfolio Manager, Distressed Debt
Sachin Gupta
Portfolio Manager
Daniel H. Hyman
Portfolio Manager
Daniel J. Ivascyn
Group Chief Investment Officer
Mark R. Kiesel
CIO Global Credit
Erica Kinsella
Product Strategist, ESG Strategies
Sean Klein
Head of Client Business Strategy – Client Solutions and Analytics
Kristofer Kraus
Portfolio Manager
Jason Mandinach
Head of Alternative Credit and Private Strategies
Kyle McCarthy
Alternative Credit Strategist
Robert Mead
Head of Australia, Co-head of Asia-Pacific Portfolio Management
Lalantika Medema
Alternative Credit Strategist
Mohit Mittal
CIO Core Strategies
John Murray
Portfolio Manager, Global Private Real Estate
John Nersesian
Head of Advisor Education
Roger Nieves
Sonali Pier
Portfolio Manager, Multi-Sector Credit
Gavin Power
Chief of Sustainable Development and International Affairs
Lupin Rahman
Portfolio Manager
Paul W. Reisz
Fixed Income Strategist
Graham A. Rennison
Quantitative Portfolio Manager
Steve A. Rodosky
Portfolio Manager
Jerome M. Schneider
Portfolio Manager
Marc P. Seidner
CIO Non-traditional Strategies
Emmanuel S. Sharef
Portfolio Manager, Asset Allocation and Multi Real Asset
Greg E. Sharenow
Portfolio Manager, Commodities and Real Assets
Kimberley Stafford
Global Head of Product Strategy; Responsible for Sustainability Oversight
Jason R. Steiner
Portfolio Manager, Private Lending and Opportunistic Strategies
Christian Stracke
President, Global Head of Credit Research
John Studzinski
Vice Chairman
Aaditya Thakur
Portfolio Manager, Australia and Global
François Trausch
CEO and CIO of PIMCO Prime Real Estate
John Valtwies
Account Manager, Global Wealth Management
Megan Walters
PIMCO Prime Real Estate
Taosha Wang
Qi Wang
CIO Portfolio Implementation
Jamie Weinstein
Portfolio Manager, Corporate Special Situations
Paul-James White
Portfolio Manager
Tiffany Wilding
Jerry Woytash
Portfolio Manager, Short-Term Desk
Nelson Yuan
Kirill Zavodov
Portfolio Manager, Real Estate
Mike Cudzil
Portfolio Manager
Ben Bernanke
Chair, Global Advisory Board
Seray Incoglu
Portfolio Manager, Commercial Real Estate
  • Alphabetical
  • Most Recent
Section : Date : Experts :
Reset All
Private Markets: Early Innings for Asset Based Lending
Yield Advantage: Key Takeaways from PIMCO's Secular Outlook (video)
The Yield Advantage in Global Markets
How Can Your Cash Work Harder?
Investment Strategies

How Can Your Cash Work Harder?(video)

How Can Your Cash Work Harder?

Investors hold cash for a variety of reasons, but having the bulk of cash in traditional instruments may not be the best option across all the reasons for holding cash. A liquidity tiering strategy can help investors gauge how much cash they actually need in their portfolios based on their goals and objectives -- and how much they should consider allocating to higher-returning short duration strategies.

Specialty Finance: An Expanding World of Opportunity
Gain an Active Edge in the Bond Market (video)

Load more results Load {{cCtrl.fetchResults}} more results