Pulais: US stocks face challenges, increasing allocation to Asian markets to a high configuration level

According to the Zhitong Finance APP, Thomas Poullaouec, Head of Multi-Asset Solutions for Asia Pacific at PIMCO, and his team have released a latest report outlining global asset allocation views and investment environment outlook. Driven by the Trump effect following the U.S. elections, the market initially focused on the potential impacts of growth-supporting policies. However, as attention quickly shifted to trade and geopolitical policies, market sentiment also changed. Ongoing tariff threats have made it difficult for the market to assess their impact on economic growth and inflation, while the U.S. economy is also under pressure—inflation has just begun to be controlled, and the economy continues to record growth.

However, the latest data shows a weakening in U.S. economic indicators, deepening market concerns, primarily due to increased policy uncertainty. If the unclear environment persists, it will have real impacts on government, corporate, and consumer behavior. PIMCO holds a cautious outlook on the short-term prospects and is on the lookout for investment opportunities amid expected increased volatility.

This year, the market opened unexpectedly, with U.S. stocks facing challenges after two years of strong performance, while investment sentiment in Europe and China has improved. Optimism regarding a resolution to the Russia-Ukraine conflict, the European Central Bank's easing policies, discussions on increased defense spending, and expectations of reduced punitive tariffs are supporting investment sentiment in Europe. Meanwhile, influenced by news related to DeepSeek, the Chinese market has risen driven by technology stocks. Although long-term structural issues remain, and tariff risks may pose pressure on European and Chinese stock markets, these markets still offer attractive valuations compared to U.S. stocks, especially given the narrowing economic growth gap. Therefore, there is a tendency to increase the investment allocation outside the U.S. market.

Given that the U.S. market's standout performance is being challenged, political uncertainties (especially regarding tariffs) are increasing, and skepticism remains about whether the upward momentum in markets outside the U.S. can be sustained, PIMCO has reduced its overweight stance on equities to lower the risk level of the investment portfolio. In equity allocation, preference is given to cyclical sectors with attractive valuations, anticipating that the market will further expand from large-cap growth stocks in the U.S. to a broader range of sectors.

As market sentiment improves, the European Central Bank adopts a dovish stance, fiscal and defense spending may increase, and further stimulus measures are expected, moderately reducing the underweight position on European stocks. Additionally, the allocation to Asian markets (excluding Japan) is raised to an overweight level to benefit from positive sentiment towards technology companies driven by DeepSeek-related news, as well as the expected easing of negative factors in ASEAN countries.

Furthermore, a moderate underweight position on bonds is maintained, as it is anticipated that interest rate volatility will continue amid mixed growth and inflation data, with policies still unclear. In fixed income, a high allocation to global high-yield bonds is maintained, as their fundamentals remain supportive, but close attention is being paid to the impacts of trade uncertainties. Additionally, the allocation to Asian credit is increased to an overweight level, given its robust fundamentals and technical aspects