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Weekly Market Update

Commentary from portfolio manager, Geraldine Sundstrom, on what’s moving markets and how the PIMCO GIS Dynamic Multi-Asset Fund (DMAF) is positioned.

The worst seems to have been averted.

This week brought more soothing news on the global economic front and it would seem that the worst has been averted for now.

The worst Brexit scenario is an almost impossibility, European data seems to be showing signs of life after a near death experience, US retail sales just about delivered and the monthly Chinese data releases showed that things are broadly under control.

Yet true signs of a recovery are still missing but a stabilisation is a necessary first step to a potential recovery that could be coming in the next months supported by the China stimulus, a US-China trade deal, European fiscal stimulus, the ECB TLTRO-II and a patient Fed.

Certainly markets are not waiting around too long and the quadruple witching (futures, options) expiry of this Friday saw a large number of short positions not rolled resulting in large multi-billions purchases upon expiry.

Technicals and fundamentals therefore pushed markets to finish the week on an upbeat note.

The road ahead is still long and we will now enter a buy-back black-out period, potential guidance (profit warnings) ahead of Q1-19 earnings releases and of course the Fed will get a chance to clarify its stance on rates via the dot plot and the balance sheet.

In DMAF portfolios we have also gone patient, maintaining our equity positioning in the mid 30s with our same emphasis on EM/China and quality stocks in the US and Japan. However we lowered our duration yet another 0.3 years in the face of lesser immediate risks to the outlook but also very low absolute rates. Our overall safe duration is now just below 3 years.

The Author

Geraldine Sundstrom

Portfolio Manager, Asset Allocation

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Data as of 18 March 2019 unless otherwise stated. 

Past performance is not a guarantee or reliable indicator of future results and no guarantee is being made that similar returns will be achieved in the future.

GIS FUNDS
PIMCO Funds: Global Investors Series plc is an umbrella type open-ended investment company with variable capital and is incorporated with limited liability under the laws of Ireland with registered number 276928. The information is not for use within any country or with respect to any person(s) where such use could constitute a violation of the applicable law. The information contained in this communication is intended to supplement information contained in the prospectus for this Fund and must be read in conjunction therewith. Investors should consider the investment objectives, risks, charges and expenses of these Funds carefully before investing. This and other information is contained in the Fund's prospectus. Please read the prospectus carefully before you invest or send money. Past performance is not a guarantee or a reliable indicator of future results and no guarantee is being made that similar returns will be achieved in the future. Returns are net of fees and other expenses and include reinvestment of dividends. The performance data represents past performance and investment return and principal value will fluctuate so that the PIMCO GIS Funds shares, when redeemed, may be worth more or less than the original cost. Potential differences in performance figures are due to rounding. The Fund may invest in non-U.S. or non-Eurozone securities which involves potentially higher risks including non-U.S. or non-Euro currency fluctuations and political or economic uncertainty. For informational purposes only. Please note that not all Funds are registered for sale in every jurisdiction. Please contact PIMCO for more information. For additional information and/or a copy of the Fund's prospectus, please contact the Administrator: State Street Fund Services (Ireland) Limited and State Street Custodial Services (Ireland) Limited (collectively “State Street”), Telephone +353 1 7768000, Fax +353 1 7768491. © 2019.

RISK: 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 the current low interest rate environment increases this risk. Current 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. Commodities contain heightened risk, including market, political, regulatory and natural conditions, and may not be suitable for all investors. Currency rates may fluctuate significantly over short periods of time and may reduce the returns of a portfolio. Derivatives may involve certain costs and risks, such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested. Equities may decline in value due to both real and perceived general market, economic and industry conditions. Investing in foreign-denominated and/or -domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. Sovereign securities are generally backed by the issuing government. Obligations of U.S. government agencies and authorities are supported by varying degrees, but are generally not backed by the full faith of the U.S. government. Portfolios that invest in such securities are not guaranteed and will fluctuate in value. High yield, lower-rated securities involve greater risk than higher-rated securities; portfolios that invest in them may be subject to greater levels of credit and liquidity risk than portfolios that do not. Mortgage- and asset-backed securities may be sensitive to changes in interest rates, subject to early repayment risk, and while generally supported by a government, government-agency or private guarantor, there is no assurance that the guarantor will meet its obligations. Income from municipal bonds may be subject to state and local taxes and at times the alternative minimum tax. Swaps are a type of derivative; swaps are increasingly subject to central clearing and exchange-trading. Swaps that are not centrally cleared and exchange-traded may be less liquid than exchange-traded instruments. Inflation-linked bonds (ILBs) issued by a government are fixed income securities whose principal value is periodically adjusted according to the rate of inflation; ILBs decline in value when real interest rates rise. Treasury Inflation-Protected Securities (TIPS) are ILBs issued by the U.S. government. Certain U.S. government securities are backed by the full faith of the government. Obligations of U.S. government agencies and authorities are supported by varying degrees but are generally not backed by the full faith of the U.S. government. Portfolios that invest in such securities are not guaranteed and will fluctuate in value.

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