PIMCO - Secular Outlook “A Tale of Two Cities”

• Continued robust global growth that, in composition, is less G-3 centric and driven to a greater extent by emerging markets that are in the midst of a development breakout phase
• An upward trend in global inflationary pressures reflecting the spillover of global demand into commodities, gradually rising wage rates in emerging economies, industrial/developing policy responses that place greater emphasis on employment and social spending, and a U.S. monetary policy that may be domestically appropriate but internationally inflationary
• A reversal in the secular bullish run for corporate profits in industrial countries, overall and relative to labor
• Institutional re-alignments in the global financial sector: In industrial countries, this will be driven by regulatory changes and post-crisis balance sheet management; and in emerging economies, it will be driven by the further maturation of capital markets and the evolution of sovereign wealth funds