Pimco's Ivascyn Warns of 50% U.S. Recession Risk Amid Tariff Concerns

Pimco's Chief Investment Officer, Dan Ivascyn, has expressed heightened concerns about the U.S. economy, stating that the probability of a recession has reached its highest level in recent years. Ivascyn pointed out that tariffs could result in a more "stagflationary" environment, characterized by slowing economic growth and rising inflation. He warned that the U.S. economy is increasingly at risk of entering a recession, a scenario that has become more likely due to recent economic developments and policy uncertainties.

Ivascyn's remarks come at a time when global economic conditions are already facing significant challenges. The ongoing trade tensions and the potential for further escalation in tariffs have created an atmosphere of uncertainty, making it difficult for businesses to plan for the future. The combination of slowing economic growth and rising inflation could force the Federal Reserve to make tough policy decisions, potentially impacting both monetary and fiscal policies.

The possibility of a recession in the U.S. has broader implications for the global economy. As the world's largest economy, any significant downturn in the U.S. could have ripple effects across various sectors and regions. Investors and policymakers are closely monitoring the situation, as the outcome could influence global financial markets and economic policies.

Ivascyn's warning highlights the need for vigilance and preparedness in the face of potential economic headwinds. Businesses and investors should consider diversifying their portfolios and exploring opportunities in sectors that are less sensitive to economic cycles. Additionally, policymakers may need to implement measures to support economic growth and mitigate the impact of a potential recession.

Ivascyn anticipates that the final tariff rates may be reduced and will closely monitor how President Trump adjusts policies based on market reactions and input from policymakers. Despite the economic uncertainties, Ivascyn remains optimistic about high-quality sectors such as mortgage-backed securities, citing strong household balance sheets as a reason for this optimism. Over the past two months, Pimco has slightly increased its holdings in U.S. government bonds, with a focus on shorter-term securities.