The global economy may be firing on all cylinders at the moment, but there are three reasons to believe the third-longest expansion in history could “peak” in 2018, says Pimco. The world is currently enjoying synchronised global growth for the first time since 2010, but according to Pimco’s global economic adviser Joachim Fels, that could “peak” in 2018. A ‘Goldilocks’ scenario of easy financial conditions, fiscal stimulus from developed countries and the continued suppression of financial volatility in China is currently “baked into” asset prices, Mr Fels said.
As such, investors should be watching three factors very closely to determine whether the current run-up in asset prices is likely to be coming to an end. The first concern for Mr Fels is the high level of public debt in the developed world – specifically, in the US. The Republican tax bill, passed at the end of 2017, will add approximately US$1 trillion to US public debt over the next 10 years, he said. The Republican tax bill, passed at the end of 2017, will add approximately US$1 trillion to US public debt over the next 10 years, he said.
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