One factor weighing on the potential in equity markets would be that Shiller price to earnings ratios are above historical norms. The "Shiller P/E" was named after Yale University economics professor and Nobel laureate Robert Shiller.
Pimco assured investors, however, that it could still deliver higher returns over the next half-decade despite modest growth and low upside on assets.
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"A sow's ear can be turned into a silk purse even if 10-year Treasuries are range-bound between 2.5 percent and 4 percent as we expect over our secular horizon," the report said.
In economic terms, a secular trend is a market tendency that is sustained over the long term. The term is most often used to distinguish those tendencies from seasonal variations and the effects of economic cycles.
The "New Neutral" title of the report marked a shift away from the firm's "New Normal" phrase, which it coined five years ago to describe a period of global economic stabilization following the 2008 financial crisis.
Pimco said that, despite the promises of an energy revolution for the U.S. economy, there was a risk that the U.S. and the broader global economy would be unable to grow and generate inflation at levels that preceded the 2008 financial crisis "for many years to come."
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The company also said that large sovereign debt in many euro zone countries would probably lead European Central Bank policymakers to keep interest rates lower for longer and added to the odds of a "major quantitative easing program."
The company said that euro zone growth rates would likely not exceed 1.25 percent on average over the next three to five years and that the region was "not really healthy."
With regard to China, it said monetary policy in the country must remain accommodative and that growth would be between 6-6.5 percent.
Pacific Investment Management Co, a unit of European financial services company Allianz SE, had $1.94 trillion in assets as of March 31, according to the firm's website.