At the beginning of the year, many investors were expecting stronger growth, lower inflation, and additional interest-rate cuts. Six months later, that picture has shifted considerably.
Inflation has proven more persistent than expected, while central banks have less flexibility than markets anticipated at the end of 2025. Yet equity markets and corporate bonds continue to trade at elevated valuation levels.
«The market is betting that we will return to the environment investors expected at the start of the year,» Lotfi Karoui, Managing Director and Multi-Asset Credit Strategist at Pimco, said. From an asset-allocation perspective, this argues for greater selectivity and a stronger focus on potential downside scenarios.
Corporate bonds remain surprisingly resilient
At first glance, corporate bonds appear expensive. Credit spreads are close to historical lows.
