The concept of the New Normal is often misunderstood and does not only refer to a period of sustained lower growth, according to the world's largest bond manager.
Instead, the new post-crisis global economic environment is characterised by a more complex interplay of factors, which have reset the financial benchmarks, PIMCO market strategist and portfolio manager Anthony Crescenzi said in a conference call.
"The New Normal is more than just slow growth. The perception often is that we are betting solely on slow growth, but that is not the case and in fact it can mean a lot of things," Crescenzi said.
"We expect credit availability to be lower than it used to be. That is a concept that most can agree with.
"There are actually 100 million fewer credit cards out there, according to recent Federal Reserve data, and we know about the difficulties of obtaining credit."
Crescenzi also pointed out that the destruction of wealth during the global financial crisis has changed people's mentality towards spending.
"There has been an enormous amount of wealth destroyed through housing and of course the equity market and that affects the way people behave," he said.
"In the US household sector, 20 per cent of homeowners are under water and 33 per cent are very close to being under water. The idea of loss of wealth affecting behaviour is an important concept in the New Normal," he said.
Crescenzi said that under the New Normal, the level of government involvement also remained quite high.
"The government is a price setter and not just a regulator - you could say it's a player, not just a referee," he said.
In relation to bond investments, Crescenzi said the New Normal meant investors can no longer expect to generate good returns from investing in long-dated bonds.
"With the duration tailwind ending you have to look at other sources of value and opportunities, because in the New Normal there are areas of the globe where investors, which are basically lenders, want to have their money in places where you are more likely to get your money back and this includes the emerging markets world," he said.
