The AI capital expenditure cycle remains solidly on track to eclipse the telecom boom of the late 1990s and become the largest investment cycle since the railway buildout of the 19th century in inflation-adjusted terms. T

By repeatedly describing standard inflation gauges as “imperfect measures of underlying inflation,” Federal Reserve Chair Kevin Warsh has pushed a long-running technical debate into the center of the policy conversation: What is the best way to measure underlying inflation?

Just as important, the dollar and U.S. Treasuries have continued to behave like hedges in periods of broader market unrest (driven by geopolitics or other conditions). When risk assets come under pressure, Treasury yields have generally fallen, or the dollar has tended to find support.

Energy markets have reached a precarious moment, with the path of prices over the remainder of the year – and potentially beyond – hinging on two key questions.

The Federal Reserve left its policy rate unchanged in July, with three participants dissenting in favor of a hike. Prior to the meeting, markets had priced roughly a one-third probability of a rate hike, so the hold was dovish relative to market pricing.

Leverage, ratings arbitrage, liquidity transformation, and a growing willingness to embrace complexity and illiquidity are becoming more visible across parts of the financial system.

Inflation remains above target, especially the Federal Reserve’s preferred core Personal Consumption Expenditures (PCE) inflation measure, as choppy data have challenged the view that disinflation will proceed smoothly.

In the Warsh Fed's new era of two-way risk, bonds offer something rare: potential downside risk mitigation that investors get paid to hold.

The relative cheapness of Treasuries versus interest rate swaps mechanically affects how corporate bond spreads are measured, but it appears to have limited influence on how corporate bond spreads actually behave.

Our baseline outlook still sees the Fed on hold through 2026 amid gradually easing price pressures. But Waller’s comments suggest that after a string of firmer Personal Consumption Expenditures (PCE) inflation prints, the Fed now places greater emphasis on responding if inflation surprises sharply to the upside or proves more persistent than expected, regardless of which factors are driving the inflation. And this raises the stakes for incoming inflation data throughout the year.

Investors should consider where in the capital structure they are best compensated for risk. Equity may offer income with upside potential from active asset management, whereas debt may offer income with downside mitigation.

The first wave of upgrades came after the AI hyperscalers reported, by and large, strong earnings. But most of the improvement has stemmed from the rest of the non-financials index, with analysts quadrupling their one-year aggregate EBITDA (earnings before interest, taxes, depreciation, and amortization) growth expectations, from 5% at the end of January to more than 20% as of 30 June.

Higher rates, weaker underwriting, and software concentration are exposing vulnerabilities in direct lending and leveraged loans, while high yield bonds appear better positioned.

A growing share of central bankers argue that artificial intelligence will ultimately push neutral interest rates higher. Intuitively, if AI boosts productivity and lifts long-run growth, then households have less incentive to save, pushing up the real neutral rate.

A widening confidence gap in non-traded investment vehicles is testing private credit valuations, sharpening the case for manager selection and diversification beyond direct lending.

In a world of high starting yields and rupturing economic alliances, investors who actively diversify across regions, sectors, and currencies can be better positioned to pursue durable returns.

Kevin Warsh’s first Federal Reserve meeting as chair mattered less for the rate decision than for what he revealed about how the Fed intends to operate. Warsh signaled a shift toward less guidance and more flexibility.

Emerging market (EM) fixed income's risk-adjusted profile has meaningfully improved. Sharpe ratios across EM credit and local rates have rebounded, with EM credit delivering one of the strongest risk-adjusted performances in fixed income over the past two years.

The Federal Reserve held the policy rate steady at 3.50%–3.75% at its June meeting – an outcome that was never really in doubt. The more interesting signals came from the Summary of Economic Projections (SEP), the policy statement, and Chair Kevin Warsh’s first press conference, which may prove to be his most substantial.

One of the most debated topics in private credit is the size of the investment opportunity – or, in industry parlance, the total addressable market (TAM). But the way TAM is typically framed can be misleading.

For more than four decades, PIMCO’s Secular Forum has provided a disciplined framework for stepping back from short-term market noise to assess the structural forces that will shape the global economy and markets over the next five years. Yet rarely has this exercise been more consequential than it has recently.

The takeaway for both HY and EM corporates is straightforward. Once oil prices are above breakeven, further moves in oil tend to matter less for credit performance.

The U.S. economy appears resilient, judging from key economic measures. AI-driven capex continues to power investment, support equity markets, and sustain a wealth effect that has propped up consumption. Real GDP growth remains positive. Private sector balance sheets are in generally good condition and many higher income and wealthy households have benefited from equity markets gains.

AI is a transformative technology with both near-term and long-term implications for the economy. For investors, while the debt-funded AI buildout has the potential to become a secular driver of risk premia, we believe any such shift would only play out through a multi-year adjustment and would not override the cyclical forces that affect markets.

Businesses are racing to build the physical infrastructure that makes AI usable at scale – data centers, the graphics processing unit (GPU) hardware stack, power, and cooling.

Recent Federal Reserve communications have turned more hawkish, reflecting concern that persistent supply-driven price pressures could begin to feed into inflation expectations. But unlike in prior cycles, today’s environment is not defined by supply shocks alone.

Many debates in defined contribution (DC) circles focus on fees, new asset classes, and ever more complex solutions. But the biggest improvement available to plan participants may come from something far simpler: how their fixed income is managed.

Despite the move lower late last week, U.S. Treasury yields are still holding well above recent lows and close to highs not seen in more than a year. By contrast, risk assets are firmly bid: U.S. equities have been routinely touching new historical highs, and credit spreads over Treasuries remain tight.

Since the post-COVID recovery began, U.S. nonfinancial corporations have generally managed capital conservatively. They have kept credit metrics stable and, in many cases, actively improved them. That discipline was not entirely voluntary: The sharp adjustment in funding costs triggered by the Federal Reserve’s 2022–2023 rate hiking cycle raised the bar for incremental borrowing and pushed management teams toward balance sheet restraint.

Sustainable investing in fixed income has come of age. Against a backdrop of heightened geopolitical tensions, persistent economic and trade uncertainty, sustainable fixed income continued to demonstrate its appeal in 2025.

In the past year, new models from industry leaders have continued to boost AI’s capabilities. According to various capabilities tests, Anthropic’s Mythos model has leapfrogged other AI models – including in the ability to thwart or support cyberattacks.

For shareholders, the upside justifies the gamble. For bondholders, the downside is real and the upside belongs to someone else. That wedge – the classic asset substitution problem – is what credit investors are increasingly pricing, and until the re-leveraging impulse shows signs of reaching a plateau, the divergence across the capital structure is likely here to stay.

Within private credit, attempts to increase liquidity – the ability to buy or sell an asset quickly, in size, and at prices reflecting fundamental values – are welcome developments, in our view. Yet until these efforts address the market’s inherent structural constraints, including a lack of true price discovery, they will only increase the perception of liquidity without truly improving liquidity.

Something unusual is happening with U.S. inflation data. While the core Consumer Price Index (CPI) has looked relatively cool recently, core Personal Consumption Expenditures (PCE) inflation has risen sharply.

A persistent oil shock implies higher inflation and weaker growth, but risk assets appear unfazed, with equities and credit spread performance diverging from the caution implied by government bonds.

Markets and observers weren’t surprised when the Federal Reserve held its policy rate steady at the April meeting. More notable, in our view, were the three dissents by voting participants who did not support keeping the implicit easing bias in the policy statement’s forward guidance language.

Sentiment toward BDCs – funds that invest in small and midsize private U.S. businesses – has improved since early March. BDC bond spreads have stabilized and outperformed the broader investment grade (IG) index, suggesting credit investors are increasingly comfortable with downside risk.

Markets have long struggled to price geopolitical risk. Part of the issue is that each flare-up tends to be viewed as a one-off volatility jolt to be weathered and then faded once there is resolution.

Even in the event that the Middle East conflict eases and shipping resumes as usual through the Strait of Hormuz, it would likely take time for the global economy to normalize after one of the largest oil supply disruptions in decades.

Despite compositional differences – public equities generally represent larger companies with more scale, liquidity, and financial flexibility than the typically smaller, private-equity-owned issuers that dominate the software loan market – the outcome is the same: Neither market has been able to fully retrace the year-to-date sell-off in a meaningful way.

Late last year, the Federal Reserve ended its latest quantitative tightening (QT) program: the process by which it shrinks its balance sheet by selling securities or letting them mature without reinvestment.

The Middle East ceasefire sparked a relief rally last week as markets dialed back the risk of a deep, drawn‑out oil supply shock. Stocks have already erased much of the post-conflict drop. Bonds haven’t gotten the memo: Yields are still elevated, keeping a bit of extra term premium on the table.

Ever since the pandemic – when surging housing demand collided with a decade of underbuilding – housing affordability has become an increasingly important political issue and a larger focus for policymakers.

U.S. headline employment rebounded strongly in March, posting the largest monthly gain since late 2024. The jobs rebound, which was broad-based across industries, was a welcome sign after February’s data showed a sharp decline not usually seen outside of recessions.

Across corporate lending markets, some investments are easier to trade and exit than others – differences that deserve particular attention today.

Systematic equity investing is a way to invest in the stock market using clear rules and data, rather than guesswork or hunches. Instead of trying to pick stocks based on trends or headlines, this approach uses research, data, and technology to systematically identify opportunities across global markets.

Amid geopolitical uncertainty, dispersion across credit markets – rather than a broad risk-off move – has become the dominant investment signal.

In a world of intensified uncertainty and dispersion, investing becomes less about forecasting and more about favoring more liquid, high quality assets that can be resilient across a variety of scenarios.

Proposals to engineer secondary trading in private assets, often championed by vocal critics of public market liquidity, have gained renewed momentum. For some, enhanced tradability is viewed as a remedy to growing unease over the absence of transparent, real‑time valuation signals in private portfolios.

The Federal Reserve held the policy rate steady in March at 3.5%–3.75%, a widely expected outcome as policymakers navigated an unusually complex macro backdrop.