Expect the Unexpected with Pramol Dhawan

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PRAMOL DHAWAN: [Sourced from 05:53] Underpinning all of this is a change of the guard, if you like, where economics is no longer leading politics and social norms. It's actually starting to reverse the other way where social norms are leading politics and politics are leading economics. And when you end up becoming effectively the tail that gets wagged by the dog, then you should expect the unexpected.

INTRO MUSIC BED

GREG HALL: Hey everybody, welcome to another episode of Accrued Interest PIMCO’s podcast dedicated to serving financial advisors and their clients. As always, I'm your host, Greg Hall. I manage the wealth management business for PIMCO here in the United States. And with me today I'm very fortunate we've got Pramol Dhawan, Pramol's, a member of PIMCO's Investment Committee. He leads our emerging market investment efforts globally. And he's the co-author, most importantly, of a recent piece that we published earlier this month.

It's part of our PIMCO Perspectives series which is a quarterly document that Pramol and our partner Marc Seidner put together to try to be thought provoking, make sure that you know, we're asking the tough questions of ourselves and giving you guys lots of things to think about. And the most recent piece was titled, ‘Expect the Unexpected’, so Pramol, thank you for taking the morning to spend with us and talk through the most recently published piece.

PRAMOL DHAWAN: Yeah, thanks for having me, Greg.

GREG HALL: So, ‘Expect the Unexpected’, tell us about the piece and kind of the major thoughts behind it.

PRAMOL DHAWAN: Yeah, great! Well, I think the big idea here is that uncertainty's not going to go away anytime soon. So sort of the call to investors is stop waiting for things to calm down. Things may not really calm down or never really calm down. You may have these rolling bouts of volatility and start positioning for it. I mean, the wonderful thing is that the markets are affording great opportunities to, for investors to position for it and get paid for that active positioning. Look, we think we're in a new era of policy right now, and policy shocks. Governments are making big, unpredictable decisions very fast on trade, on spending, on regulation.

Markets are reacting violently and then reversing also very violently. And this environment now is I think there's enough data now and enough occurrences to say that this is the new normal of policies to borrow a PIMCO expression.

GREG HALL: Yeah. To quote ourselves, right? Yeah. And no, the, I mean it's, and you've been really thoughtful about, you know, the prospects of a new world order, and I, one factor you didn't mention, although I know it's central, you know, to how you're thinking about the world right now is geopolitical as well, right? I mean, we've had, you know, maybe in the piece you could actually just help us, you tick through some of the things that investors have had to contend with over the last, what, six weeks of the new year. So what are some of the examples that you guys run through?

PRAMOL DHAWAN: Yeah, I mean it's been a wild start. So the new year, we've had the issue in Venezuela, political issue in Venezuela. We've spoken about capping credit card spending and interest on credit cards in the US at at 10% a various set of proposals on tariffs and adjusting tariffs up and then back down again.

The issue with Greenland, whether the US is going to look to take control of Greenland or not as it may happen. And I think all of it's sort of eluding, I mean, that's just from the US' perspective. This is not meant to be a piece about The US. This is meant to be a piece about global mercantilism and global crosscurrents moving, if you like, away from a neoliberal order towards more of a mercantilist order.

GREG HALL: I'm trying to remember my Econ 101 mercantilism, global mercantilism. Let's get into that. What, how define that for, well, for me at least, hopefully the listeners, you know, are a little bit better educated than I am.

PRAMOL DHAWAN: I think one can synthesize it as a movement away from a rules based order towards a power based order. A movement away from a positive sum world towards a zero sum world, and a movement in terms of how capital is allocated from one, which under globalization prioritizes an efficient movement of capital towards mercantilism where capital is spent less efficiently.

Because quite often it tends to be done for national security reasons. And I think when we look at it in the playbook of mercantilism, many of the aforementioned factors that we spoke about Greenland and Venezuela, they all sort of make sense within a mercantilism lens.

GREG HALL: So it's, if I understand you correctly, it's, you know, sort of a simultaneous and, but they reflect each other a breakdown in what we had really sort of come to appreciate as normal in the geopolitical sphere. So cooperation agreements and a higher degree of forbearance from us as the superpower, to do those things that might be in our national interest, but they  defy global norms, but now potentially more willing to kind of break some of those norms, and then on the economic front a willingness to try things that also depart from norms, whether it's capping credit card interest rates or directing the GSEs to purchase mortgages, which happened also, you know in this very busy first quarter that we're having. So those two things kind of happening simultaneously, you view them as sort of just reflections of the same ideological shift. 

PRAMOL DHAWAN: Correct. And sort of underpinning all of this is a change of the guard, if you like, where economics is no longer leading politics and social norms. It's actually starting to reverse the other way where social norms are leading politics and politics are leading economics. And when you end up becoming effectively the tail that gets wagged by the dog, then you should expect the unexpected.

GREG HALL: Oh, that's perfect! You've tied that up perfectly, right? So it's we've moved, and I've heard Dan say this as well, Dan Ivascyn, our CIO, but you know, this shift we've experienced over the last few years where, right, we, economics used to shift political outcomes. Now politics can determine economic outcomes to a degree, right? I mean, we'll talk about bond vigilantes and we'll talk about the power of institutions and, you know, the  sturdiness of whether it's the dollar or the Fed and things like that.

But  certainly more so than we've experienced recently. You've got this first, the politics happens, then the economic impact. All right, so all of this is happening and we've gotta digest this from an investment perspective. I just, I wanted to run through because I just think it's interesting, you know, amidst all of this volatility.

So the last time that you and I spoke on the pod was July of the past year. And since then we've had I think three rate cuts. So a total of 75 basis points. The 10 year was at four four when we last spoke. It's at four spot, one ish this morning. The Ag has done what we suggested it might do, which is essentially kind of earn its yield over that time period, about 5 odd percent, maybe a little bit more with some, with those rate cuts adding to total return.

Equity markets, interestingly, 7.5% since we last spoke. And we've been cautious on equity valuations, right? So we can talk about that. Emerging markets and global markets have outperformed the US equity markets substantially since then. Another theme that you and Marc, you know, had highlighted back then, and the dollars more or less, you know, kind of held even with where it was then, which I think reflects, you know, some of the competing cross currents that we talk about with regard to the dollar.

So I think, you know, my question for you is, when I look at some of these numbers that, you know, if I describe that without having the prelude been all the volatility that is in the underlying economies and politics, you think, oh, it seems like a pretty sanguine, pretty benign outcome, right? So if we're expecting the unexpected, when can we expect the unexpected to matter in markets and investment strategy?

PRAMOL DHAWAN: Well I think it has mattered. It may not be volatility in an homogenous manner, right? Well, like we saw in the global financial crisis where cross asset volatility converged to one and everything sort of sold off together. You are having these sort of rolling bouts of volatility. We've seen it in gold and precious metal markets, some in private credit markets with the GSEs and buying of mortgages and agency mortgages as well, you're seeing rolling bouts of volatility. And I think that that is really the new normal that we're going to see.

And underpinning all of this is still pretty healthy US economy, an economy that delivered 8% nominal growth in Q4, that's sort of trending towards 7% nominal growth Q1 of this year, really muted inflation, a Fed that's probably gonna cut a couple more times this year. So we think the actual backdrop still is quite conducive for staying invested.

But I do think that it has mattered. And what has mattered very fortunately for us is that the bonds are doing exactly what they should be doing, which is hedging against equity volatility. And that correlation aspect is really held up.

GREG HALL: That was a little under assault coming outta 2022. And then, you know, I think you and I, and others around here, we've heard the criticism that bonds and equities have been too positively correlated to hedge each other. You're seeing that relationship revert back to what we've expected historically, right?

PRAMOL DHAWAN: We're seeing it revert back. And I think we can look back at the time of interest rates being at the zero lower bound as being an aberration in the longer term history. And look, quite frankly, the movement from the zero lower bound to 5% in 10 year treasuries, that was tough. That was a tough ride. I'm not gonna sugar, in a year. But where we are right now is bonds are giving you a decent income and they are inversely correlated to equities, which means they are going up in price when equities are going down in price.

And it's exactly what you want to see. And I think when Marc and I sort of think about the rebalancing effect, I think it's important to note that the share of equities in household financial assets is at the highest on record, at the highest on record, when in our minds, stocks look expensive when valuations are high. At the same time, high quality bonds are currently out yielding the forward earnings of S&P 500. And are at the lower end of historical range for household ownership.

You’re at this fortunate time-period where your earnings yield in a high quality, fixed income portfolio exceeds that of an equity portfolio.

GREG HALL: I think a lot of advisors listening, you know, and you know, they know this intrinsically to be the case and for no other reason than, you know, if you started with a more traditional 60/40 allocation 10 years ago and you've let it ride along the way, especially some of your clients are a little bit more in growth mode and accumulation mode than in, you know, managing for sort of a fixed income, you know, type of retirement arrangement.

Then your equity, you've done a great job on behalf of your clients and your equity portfolio's done extraordinarily well, and you've worked your way into more of like, 85/ 15. I, so I think that probably rings true to a lot of people listening.

I think that the tricky thing I'll always, and with maybe a little bit of a US had on, 'cause I don't know how it works everywhere in the world when it comes time to reallocate, when it comes time to sell, that the tax implications of reducing your equity exposure are obviously something that takes a lot of thought, right?

Because your basis is low and you've done really well. But putting that aside for the second, you know, the case you're making, you know, that it given vol levels and just given what you can get paid for owning fixed income, and given we're more confident in the inverse price performance and the hedging capabilities of fixed income, it's a time for advisors to be looking at, you know, taking some chips off the table.

PRAMOL DHAWAN: I think that's right. I think, you know, many of the arguments for taking the chips off the table with equities can be made the same with passive investing as well. There is an inertia component to owning this. And look it's been a great time to own equities, as you quite rightly stated. It's almost in a monotonic fashion, just gone up.

And it's been the right call for people to own it, but let's sort of contextualize that against the backdrop of an incredibly conducive environment, both economically and geopolitically. And as I said, you know, the, during that same time period, you can make a very coherent argument that passive investing made sense. You know, you had low volatility, you had QE driven markets, central banks were telegraphing every move, global cooperation was keeping things stable.

You know, in that world, just buying the index or buying the equity index made perfect sense and it worked very, very well. We are saying that that world has gone. We're not in that world at the moment. In fact, we are trending towards the opposite environment. One of fragmentation, one of policy unpredictability, divergent winners and losers.

So I think we should question, is passive investing as safe anymore? You know, just buying blindly an index, an index that tells you to buy everything forces you to buy everything in the index, including the most overexposed and the most overvalued parts to the underlying index. I think if there was ever a time to think about questioning that this is that environment

GREG HALL: Yeah it's interesting 'cause I think we've always held, you know, the equity markets, the indices for all of the shortcomings that you just alluded to, you know, relatively efficient structurally reflect the value of being ascribed to the individual components by the market. We had Mohit our CIO for core on the last episode of the pod. He and I spent about 15 minutes going through passive versus active in fixed income and just, you know, some of the structural weaknesses of the aggregate.

It reflects the most indebted companies, not the most valuable companies. It reflects issuance at any given time. Instead of, you know, a maybe, a more, a longer kind of longitudinal look at debt issuance over time, it simply can't replicate, you know, the thousands upon thousands of debt issues that an individual company might have that are floating rate, fixed rate, that's five year tenure. 

You've got a lot of uneconomic actors involved in the fixed income markets, central banks and insurance companies that just have motivations that you or I as savers, you know, might not have. So let me ask you this. When you think globally, because you've got such a phenomenal global perspective, I just talked a lot about the Ag. Do you, do you see that pattern repeating in global bond indices as well?

PRAMOL DHAWAN: Yeah, we do. And I think, if anything it's more prevalent in global bonds, well because the US has for a long period of time been the deepest capital market, the recipient of all capital flows. So that it's the most efficient capital market as well is highly correlated to the fact that it's the deepest capital market.

When you sort of widen the aperture and you think more globally global bonds and including emerging market bonds as well, I think those inefficiencies that active managers can capture, they really get amplified and you can really sort of earn your stripes if you like, on investing in those markets. But all of those comments you made are exactly right, but they've been true for a long period of time.

They haven't really changed. But what we're saying is that there is an inflection point now, that there is a point that should make you question passive versus active. And that is the change of politics effectively leading economics, a change towards mercantilism, the change towards more of a power-based order versus a rules-based order, which can really violate some of the blind investing theses that have been put out there. The beta only thesis.

GREG HALL: Is one way of thinking about it, that the inefficiencies have always been there, but you think that exploiting them is going to be a whole lot more profitable in this new world order we're talking about than in the more repressed regime we've been in.

PRAMOL DHAWAN: I think that's right. And, you know, I don't wanna talk for Marc, but Marc has been doing this for a whole lot longer than I have, and he…

GREG HALL: Is that talking for Marc or against Marc, I don’t know what the…

PRAMOL DHAWAN: Marc has said. He's never been so excited about an active management backdrop. And he's seen many different cycles. And look, I started my career in the early 2000s. I've seen quite a lot of different political cycles and economic cycles. But this by far and away for a macro investor, for an active investor, for one that has a global sense, and this is by far the best backdrop that we've ever seen.

GREG HALL: How, you know, if I were an advisor sitting in front of you right now, how do I get my mindset in the right place to take advantage of what's going on? Just, I mean, the number of topics you and I have touched in this very brief conversation is mind boggling. So how do I get ready for what's coming to me?

PRAMOL DHAWAN: Look, I think just to say a very high level that the savers are becoming spenders, the spenders continue to spend, we want to position ourselves to capitalize on when there is a transfer of wealth between governments and the private sector. We've seen that very clearly and acutely in the US and what that means for nominal assets like the equity markets. You're starting to see that in Europe and in some parts of emerging markets where military spending is going from one to 5%.

And, and you're taking on more of government debt across Japan, across Southeast Asia, across some parts of Europe as well. And that's gonna benefit the private sector and some of the equity markets there. And you quite rightly alluded to the fact that those equity markets outperformed the US really for the first time last year that we've seen in the best part of a decade.

And I think that that can sort of continue, not just on the equity side, but also on the fixed income side as well. There's lots of opportunities on the currency markets and cyclical currencies on local government bonds, on emerging market credit. Look, this is an environment where status quo, the old playbook worked really well for the best part of two decades. And we think we are moving into a new playbook now.

And that playbook is active over passive, it's global, over domestic, and it's really thinking about and trying to hedge for those unknowable unknowns that there might be in the portfolio.

GREG HALL: Yeah. It's interesting. I think, you know, it's important that we be able to sort of break down these themes into component pieces that not just, you know, advisors who are experienced and sophisticated and, you know, have no trouble kind of following through the discourse, but their clients who, you know, are successful, you know, phenomenally, you know, gifted professionals, but may not be in finance, right?

So can we articulate some of these things in a way that's digestible and the savers are becoming spenders and the spenders are becoming saviors. I didn't know where you were going with that, which is interesting, and then to talk about re-militarization in Europe based on an understandable lack of confidence that their security umbrella will be the same that it has been for the last, you know, the post-World War II era.

That's a really interesting comment. And I think that would help people get their brains around the idea that we should be looking again at European equity markets, we should be thinking about the differences between global fixed income markets. The other topic you mentioned was Japan, just very briefly.

And you dwell on this a little bit in the piece. So I, and I'd sort of ask you for some of these governments and I won't exclude the US. You mentioned bond vigilantes. So what can go wrong as the savers become spenders? And some people maybe don't want them to become spenders or worry about the level of spending.

PRAMOL DHAWAN: Yeah. And Japan was a great example, in the UK before it, of a time where the bond markets have reacted quite negatively to VAT cuts or fiscal profligacy. Japan's an interesting macro example because at the same time that the government's trying to spend more and more money, the stock of government debts, GDP is very high, well over, well north of 200%.

The central bank is running quite loose monetary policy as well. Inflation's at 2.9% and domestic monetary policy is about 75 basis points right now. So you are running quite negatively, deeply negative real yields in the front end of the curve. And that sort of sparked a very large sell off in long dated government bond yields and the currency, and that led to somewhat of a reversal of policy, a government that sort of recommitted back to less fiscal prophecy a rate check in the currency market between the New York Fed and the Bank of Japan.

And really highlighting that there are limitations to excess spending. Now, you sort of mentioned the US. We don't think that's the case yet in the US, we think that the US continues to be the world's reserve currency. We think that the yields that the US harvests, the yields that the US offers can be harvested by investors.

But it's important to understand that one can't run deficits in perpetuity. And that there will be sort of a calling moment for every economy, whether it's advanced economies or in emerging markets. And somewhat the emerging markets are a little bit more used to this because the market reaction functions in terms of disciplining the bond vigilantes, as you said.

It happens very quickly through emerging markets. And the UK and Japan have seen small instances of similar types of price action. But for the US we think that the dollar continues to be the world's reserve currency, that there's no sort of questioning of that over time. But I do think that this marginal dollar of reallocation sort of opens a question, not necessarily for the US markets, because it continues to be a deep, large pool of capital.

But what happens when you start seeing some reallocation to other markets? And you saw what happened in precious metals this year, you can have 9, 10, 11 standard deviation moves, if you like this. It's sometimes the analogy I use with my 7-year-old daughter is elephants running through a door and things break  when that happens. So if you think on the other side of the coin, yeah, there's not really a market that can compete with the US in a one-to-one fashion in terms of the depth of that capital market.

Now, you may be in a one to many relationship that calls for diversification. We indeed think that we should be thinking more in a multipolarity world where you think about diversification on the portfolios. But it's important to know that things can break on the other side of the ledger.

GREG HALL: No, I think, I mean, I think it's an important point you're making, and I would, I think it rhymes with some of the things that we hear from Libby Cantrill, who's our public policy head. You know, she reminds us that as much as they're being tested right now, US institutions are very strong. The Fed is a very strong institution.

Rich Clarida has also reminded us of that US markets are strong, global markets are strong, that what you seem to be describing is  an upswing in volatility, an upswing in sector rotation, an upswing in maybe the consequences of different geographic decisions about how you allocate capital, but not a breakdown in predictive total predictability for markets,  which seems to me like the ideal environment for what you and Marc and the rest of the team here at PIMCO do.

PRAMOL DHAWAN: That's right. I mean, we are within our investment committee, we're always trying to sieve through noise and signal ratios. And I  think this notion of this too shall pass. It's very important to sort of internalize that a lot of the noise that we're seeing right now is temporary. Now, there are some fundamental breakdowns, there are some changes. I mean, the government spending from one to five is real.

And history sort of tells us when you get to five, it's really hard to go back to 1% again, that means capital will be reallocated in different norms. So if we break out what we think is sort of true structural, secular changes in terms of how capital is allocated globally versus domestic equities versus bonds, passive versus active, we think those are real sort of tectonic shifts, if you like.

But there are noises about, you know, degrading of institutions and, you know, within the US in particular, I think that the institutions as Libby and Rich have commented on,  have shown that they've withstood a very, very acute pressure right now and  have proven to be strong and resilient. And I think that sort of underpins the investment thesis in the US.

GREG HALL: So, you know, we had to, one of the reasons that Marc couldn't join us is 'cause we were kind of limited in our scheduling ability for today's pod. 'cause you're heading off to Europe in the next day or two. And I believe having an emerging market investment summit while over there it's not in your piece explicitly, but while we've got you, why don't you, can you just give us a sense of how you're thinking about investing in emerging markets?

It's not an area, I'll tell you, it's not hugely prevalent for the advisor community in the US as you know. But we've seen a little bit of movement in that direction over the last, you know, couple of years. So I'm sure a lot of people listening would be interested to hear what you think.

PRAMOL DHAWAN: Yeah. I think it's an exciting time for emerging markets. We’re articulating the reasons to sort of invest in EM as being fivefold. Firstly, just from a fundamental perspective, Greg, this is a great backdrop for EM, sovereign balance sheets. 2025 was the largest year on record of upgrades  to downgrades.

We sort of track this ratio and these upgrades to downgrade cycles, they last about seven to 10 years. So you're sort of year one, year one and a half in an upswing cycle. That is the underpinnings of any investment in emerging markets. What is the sovereign balance sheet doing and how much confidence can I have?

And you are right in an upgrade cycle. I think the second point that I've mentioned is on inflation. I think emerging markets have really done a great job at homogenous manner in a homogenous way.

But done a great job in terms of tackling inflation. Now for the first time on our recorded history, EM inflation excluding China. 'cause I think it's always important to take China data out of the ledger. But EM, inflation excluding China now is tracking underneath US inflation. And there was a small aberration, in, during COVID where US inflation was high, but sort of that excluded going back 25 years.

We've never really seen that happen. And consistent with that, you are, you are starting to see that being reflected in cross asset vol markets. And the third reason we would sort of mention is, you know, again, for the first time in the best part of two, two and a half decades, EM currency vol is now trading lower in financial markets and that of G7 currency vol.

So the EMDM premium is not being factored from a volatility perspective. And that's hugely important. 'cause if you think about emerging market, the opportunity set, it's risk and reward. It's your reward is the yield you get, the carry that you get the risk is driven by volatility. And we've seen a collapse in volatility, but we've really seen no change in the yield perspective. So we think that's a great time for advisors to start thinking about emerging markets.

And that sort of gets us into the fourth and fifth points. The fourth point I've mentioned is it's a fundamentally different asset class than the last Em bull cycle. The last EM bull cycle was in 2004, 2004 to 2008. That was largely characterized by offshore money. In fact, around 60 cents on every dollar invested in EM was foreign money.

The vast majority of that foreign money was retail, not institutions. So short dated hot money if you like type flows going into emerging markets, chasing the commodity cycle back in ‘04 to ‘08. Fast forward 20 years to today it's completely flip reversed. Domestics are the biggest player by a factor of about seven, they're 70 cents on every dollar.

Now invested in emerging markets comes from the local players. That's important because you are burden sharing with those that have skin in the game in their own markets. The foreign money that's coming in is largely institutional. And they have a longer duration, longer time period. So you're seeing the investors that you would like to see being invested in the market actually, much more prevalent in this cycle than we saw 20 years ago.

GREG HALL: Yeah, that's interesting!

PRAMOL DHAWAN: And the final point that I just mentioned, Greg, if I may, it's a very under allocated asset class. I go back with a very simple statistic, EMs, whether on PPP or in nominal terms, think about it as characterizing about half of global economic output half of global GDP, but in terms of portfolio allocations, only about 3% of portfolio allocations.

So we think that there is room for that to sort of shift marginally higher. We are indeed, we've been seeing that in terms of our client flows and we feel it is a really exciting time to look at emerging markets.

GREG HALL: That's a really interesting rundown. I mean, I think, you know,  for most advisors, I think, would probably, you know, feel that, you know, their portfolios grounded in the dollar and domestic, you know, investments and reasonable given their clients all live here and spend here.

But, you know, we've been saying, you've been saying Dan's been saying, Marc's been saying, you know, over the last couple of years that it pays to broaden our horizons and this new world that we're living in, that's certainly consistent with that thesis.

Let me ask you a question that just to hold ourselves to the same standard, we're asking advisors to hold themselves to. So when you say expect the unexpected, what is the unexpected thing from our viewpoint that would change your opinion of the attractiveness of the current environment? What are we maybe not putting enough probability on that is out there as a risk that we ought to just be cautious about?

PRAMOL DHAWAN: Look, I think it's a great question. And I think we tend to,  as a financial community, work on the notion that past this prologue, we run lots of regressions and the regressions by definition are the past will predict the future or some sort of predictive power to the future.

GREG HALL: Yeah. They take a data set, they look at how it reacts to itself going back 40, 50, 60, 80, whatever, you, however long you get the data for.  But they have the common feature that they're all looking backwards.

PRAMOL DHAWAN: Exactly! And sort of when you're driving a car looking in the rear view mirror, then you're sort of prone to accidents if you like. Look, I think if there is ever a time to sort of question the validity of some of these,  now is that time, and I think going forward. We sort of see that this movement towards more of the macro underpinnings, the fundamental analysis looking at market technicals, thinking about what can break analyzing capital flows and to try and see if there's any predictive power on those flows are all things that we as an investment committee are doing now.

Those generally had a lower weighting in the past, because you are in this very strong beta environment, you're in this sort of geopolitically stable environment where you could really harvest the power of regressions as we sort of move towards this newer normal if you like, or the next normal, you know, we have to question the assumptions of any models.

And, you know, some models are wrong, some models are very, very wrong. And I think they can be very dangerous if we overweight, you know, the past too much,

GREG HALL: I would imagine both the volume and the value of debate at the investment committee right now is higher than it's been in a while. I'm sure you guys have, you know, you've baseline opinions and outlier opinions, but it's gotta be a great crucible for coming up with investment ideas.

PRAMOL DHAWAN: It really is. And I think when we say this to any young vice president or senior vice president coming into the organization, try and sit in on our collective forums, our cyclical forums, our secular forums, because the level of discourse and the debate that we're having, and not often coming out to conclusions just to be fair, I mean, sometimes you're debating them with no end product. And you are not endorsing conclusions, you're endorsing frameworks.

And I think for clients right now, that notion of endorsing frameworks like what we've laid out in this piece. It is really helpful. And when things are in flux and when things are very uncertain, I think we as a collective community want to get together and discuss these sometimes uncomfortable topics to be able to discuss and challenge our prior and challenge the inertia and challenge the regression models and sort of be humble about what we don't know and what is just simply unknowable in markets. And there's a whole heap that's unknowable right now.

GREG HALL: Well, I've witnessed any number of those forums in my time here. And I think we're right to pride ourselves on the degree to which they can be uncomfortable and they can result in disagreement and respectful challenging of opinions. We, you know, try to hold ourselves to a more accommodating, comfortable environment here on the podcast. But don't let this, you know, my desire to make you feel good about coming here and joining us.

It's not a reflection of how we truly debate important issues here at PIMCO, but Pramol, thank you for taking the time to walk through your latest piece with us. Expect The Unexpected is available at pimco.com in the US or global websites as you choose to visit them in your country.

Like I mentioned, it's part of PIMCO Perspectives, which is a quarterly series that Pramol and Marc Seidner put out. We try to feature them each time that they put out one of these really thought provoking and interesting pieces here on the Accrued Interest Podcast. As always, if you enjoyed today's program, we'd really encourage you to like and subscribe to the podcast on Apple Podcast, Spotify, or wherever you listen to podcasts.

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