PIMCO: The odds of a 'full-blown' trade war are lower than they were 4 months ago

Pimco, the investment management firm, has released its latest cyclical outlook for the global economy over the course of the next 12 months.

The firm's outlook, which is released three times a year, "analyzes business cycle dynamics across major developed and emerging market economies with an eye toward identifying potential changes in monetary and fiscal policies, market risk premiums and relative valuations that drive portfolio positioning."

In "Cyclical Outlook: Scaling Back" Joachim Fels and Andrew Balls scaled back the firm's expectation on four things:

• The risk of a full-blown trade war.
• A major political "accident" in China.
• Nationalist and anti-European victories in upcoming elections in France and Germany.
• Near-term inflationary pressures in the US.

Fels and Balls added that they are more bullish on GDP growth than they were when they penned the last cyclical.

"While back in December we forecast 2017 world GDP growth averaging 2.5%-3.0%, we now expect growth to be in a 2.75%- 3.25% range this year, up from 2.6% in 2016," they said.

Below are the slides from their presentation to clients: