Recently, Pimco, one of the largest bond investors in the world, has raised a warning voice: stock valuations are at their highest in about 25 years. According to Pimco, this development is a clear warning signal for investors, as stocks are extremely overvalued compared to bonds.
Key Points from Pimco’s Analysis
A central element in Pimco’s view is the risk premium for U.S. stocks, which is at a historical low. This means that the additional return investors can expect for the higher risk of stocks compared to safe assets is almost negligible. Pimco therefore advises investors to increasingly include high-quality government bonds in their portfolios, as these can currently offer attractive return opportunities.
Political Influence and Market Uncertainty
Another significant aspect highlighted by Pimco is the increasing influence of political factors on economic development, especially in the U.S. This changed dynamic between politics and economics increases market uncertainty, making safe investments even more attractive.
Historically, periods with low risk premiums often ended in significant market movements, whether in the form of stock market corrections or a decrease in long-term bond yields. A return to the mean could therefore mean either a rally in bonds or a crash in stocks.
Conclusion
Currently, stocks are very highly valued compared to historical standards, while high-quality bonds offer attractive yields. Pimco advises investors to exercise caution and recommends reallocating from expensive stocks to high-quality fixed-income securities. These assessments are based on Pimco’s market analyses from June 2025 and reflect both geopolitical uncertainties and fundamental valuation indicators.