Growth Holds, Risks Widen

Key arguments

• Global growth is expected to remain resilient over the 6-12 month horizon while inflation moderates, supported by an AI capex boom, consumer and China absorption of higher costs, and incremental central bank policy.
• The baseline relies on three buffers: a sustained AI capex cycle without overheating, continued absorption of higher costs, and stable financial conditions aided by central bank gradualism and AI-related risk appetite.
• Principal downside risks are an AI investment slowdown or contraction, a worsening energy supply shock, and abrupt financial tightening, any of which could break the benign scenario.
• Asset valuations may not fully reflect these intertwined risks, so portfolios should be diversified and resilient across scenarios.

Corresponding source evidence

1. Cyclical Outlook • October 2026 Page 02 PIMCOCyclical Outlook October 2026 Written by Tiffany Wilding Managing Director Economist Andrew Balls Chief Investment Officer Global Fixed Income Page 03PIMCO Cyclical Outlook October 2026 Macroeconomic takeaways Investment takeaways 1. · October 2026
2. In our baseline, we expect global growth to remain resilient over our six- to 12-month cyclical horizon while inflation moderates.
3. A booming AI investment cycle, the ability of consumers and China to absorb higher costs, and an incremental approach by central banks may help support growth while containing inflation.