Recession warning as US bull run closes on all-time record

Bonds giant Pimco issued a stark forecast that the world could be engulfed in recession within three years on Wednesday, casting a shadow over the US’s longest bull run in history.

Investors have sent stocks in the world’s biggest economy to record highs off the back of Donald Trump’s corporate tax cuts, a strong earnings season and unprecedented central bank stimulation of the economy.

But Pimco, which oversees assets worth $1.7 trillion, declared a 70% chance of a global recession within three to five years, as the impact of cheap money fades.

Pimco’s veteran investor Marc Seider said: “Quantitative easing was a tide that lifted all boats. If we were trying to look for historic analogies to the current environment in terms of monetary policy and possible unwind in the period to come, there are none.

“You have to enter in a possibility of a recession in the next three to five years.”

US stocks are set to break the record for the longest bull run at the close of trading today, with 3453 days without a 20% fall in the market, topping the Nineties run which ended in the bursting of the tech bubble in 2000.

Despite the intensifying US-China trade war and mounting political drama in the Trump administration, the world’s largest economy is set for its best growth since 2005.

But analysts warned the US bull market came from a low base, after 2008’s near-collapse of the global financial system, described it as “artificial” and said America’s strong performance was partly a reflection of investment uncertainty elsewhere. Neil Wilson, chief market analyst for Markets.com, said: “The US bull run is not a sign that things are going well.

“America may be the driver of the global economy but it’s operating in isolation.

“We’re seeing a slowdown in eurozone growth, emerging markets are suffering off the back of high dollar debts, and the dollar is pushing back up.

“The US is going great guns but nowhere else is and that shift towards the US, which is seen as a safer play, is the pivot you see at the top of the cycle. The global economy is already looking pretty risky.”

Economists have also raised a red flag over the US bond market as the gap between returns on short and long-term government bond shrinks to near 11-year lows, heralding a downturn.