An extreme shift in macroeconomic conditions over the course of 2022 and the corresponding impact on financial markets have significantly altered the relative attractiveness of asset classes. Markets are moving away from a “TINA” world — where “there is no alternative” to equities — to one in which fixed income is increasingly appealing. Yet, as we navigate a period of elevated inflation and an economic slowdown, our starting point is one of caution. PIMCO’s business cycle models forecast a recession across Europe, the UK, and the US in the next year, and the major central banks are pressing ahead with policy tightening despite increasing strain in financial markets. The economy in developed markets is also under growing pressure as monetary policy works with a lag, and we expect this will translate into pressure on corporate profits. We therefore maintain an underweight in equity positioning, disfavour cyclical sectors, and prefer quality...