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Navigating Tariffs
WHAT WE THINK:
- Tariff outlook: Scope, scale, and longevity of U.S. tariffs hinge on reducing the trade deficit, rebalancing global trade, and other factors. Investors may see base tariff rates remain higher, alongside more aggressive tariffs on select goods or countries, even amidst new trade deals.
- U.S. economic effects: Risk of recession has increased as consumers, businesses and markets navigate the uncertainty. Inflation risks have returned as tariffs may increase prices.
- The Fed’s challenge: The Fed will likely react more slowly to economic weakness but may focus on reducing rates if labor markets weaken.
WHAT IT MEANS FOR INVESTORS:
- Longer-term rewards: Despite short-term volatility, current yields have consistently rewarded long-term investors as income accumulates over time – see chart at the right.
- High quality focus: Favor higher quality fixed income markets, which still offer attractive starting yields.
- Seek stability and diversification: Having the flexibility to take advantage of global opportunities across asset classes may be rewarded as economies and markets diverge.
The Power of Starting Yields and High Quality Bonds
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Fed officials remain patient, likely awaiting hard evidence of a weaker U.S. labor market before considering rate cuts.
Trade Wars and the U.S. Dollar
Rapid U.S. policy changes pose challenges for investors accustomed to a global financial system anchored in U.S. markets and assets.
The outlook for U.S. growth and inflation hinges on the ability of U.S. supply chains to pivot out of China fairly quickly, a process that won’t be seamless.
Accrued Interest Podcast
Tariff Update: Navigating Global Market Turbulence

Tracking Tariffs with Libby Cantrill & Tiffany Wilding

More to Know
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Holding Steady Amid Whipsawing Markets
The outlook for the second half of 2025 remains favorable for strategies emphasizing global diversification and risk mitigation.
Greg Sharenow, managing director and portfolio manager, charts the continued resilience of commodities and their low correlation with stocks and bonds amid recent geopolitical shocks, underscoring their strength as portfolio diversifiers.
Systematic equity strategies and disciplined diversification can help multi-asset portfolios thrive in unpredictable markets.
The playbook for private credit is changing as a maturing direct lending market creates opportunities for active, relative-value-oriented investors.
As direct lending matures and other private credit areas expand, active investors can apply relative value strategies across sectors – and even entire markets – to pursue enhanced outcomes.
Unlocking durable income through discipline, active value creation, and local insight
Explore insights on the neutral rate and rising term premium, highlighting the impact on U.S. Treasury Yields, risk compensation, and strategic duration positioning with market and economic charts.
Peder Beck-Friis, an economist at PIMCO, charts rising government debt and its implications for the U.S. dollar and longer-term Treasury yields.
Fed Policymakers: Split Decision
We expect the Fed will resume gradual interest rate cuts later this year, depending on U.S. labor market trends.
How Can PIMCO Help You?
Disclosures
All investments contain risk and may lose value. Investors should consult their investment professional prior to making an investment decision. Past performance is not a guarantee of future results.
Investing in the bond market is subject to risks, including market, interest rate, issuer, credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and low interest rate environments increase this risk. Reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed.
Statements concerning financial market trends or portfolio strategies are based on current market conditions, which will fluctuate. Different types of investments involve varying degrees of risk. There is no guarantee that these investment strategies will work under all market conditions or are appropriate for all investors and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. No representation is being made that any account, product, or strategy will or is likely to achieve profits, losses, or results similar to those shown.
Bloomberg U.S. Aggregate Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis.
PIMCO as a general matter provides services to qualified institutions, financial intermediaries and institutional investors. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This material contains the current opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. PIMCO is a trademark of Allianz Asset Management of America LLC in the United States and throughout the world. ©2025, PIMCO
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