Thomas Poullaouec, Head of Diversified Asset Solutions for Asia Pacific at PIMCO, and his team recently released a report stating that the Bank of Japan unexpectedly raised interest rates at the end of July, followed by the US Federal Reserve decision to delay a rate cut the next day, and the US labor data released fell short of expectations, leading to a global sell-off in risky assets. Japan was one of the stock markets most affected by the turmoil. The sharp rise in the Japanese yen exacerbated the steep drop in the Japanese stock market, with unwinding of yen carry trades. On the other hand, market expectations for US economic growth quickly adjusted, with investors worried that the Federal Reserve might lag behind the situation, and the current situation could present more daunting challenges for both the Federal Reserve and the Bank of Japan. PIMCO stated that in the US, recent economic data reflected a deterioration in manufacturing and consumer financial conditions, with subsequent employment data falling short of expectations as well. There is a view that when interest rates are lowered, the adverse impact of high rates on small-cap stocks will decrease, but small-cap stocks are more sensitive to the economic environment, which is the market's biggest concern right now. Given the difficulty in determining whether the economy will have a "soft landing," if there is a lack of clear evidence indicating that growth will stabilize, a rate cut may not be enough to stimulate small-cap stocks to outperform the overall market. PIMCO maintains a bias towards higher allocation to stocks, with recent market declines improving valuations. Value stocks are expected to benefit from loose monetary policy, while the higher expectations for growth stocks may affect their performance. In fixed income, PIMCO continues to favor high dividend-yielding assets, such as high yield bonds, Asian credit, and emerging market bonds, as the overall fundamentals still provide support.