Emmanuel Roman, chief executive officer of Pacific Investment Management Co. (David Paul Morris/Bloomberg)

Investors should be on guard for a recession in the next five years by stockpiling cash for the day when stocks and bonds — as they always do — go on sale.

So says Pacific Management Investment Co., the bond mutual fund giant known as Pimco.

“Investors should use cyclical rallies to build cash to deploy when markets correct and risks are re-priced,” according to Pimco’s annual “secular outlook” report released Wednesday.

The asset firm, with $1.51 trillion under management, puts the risk of recession at 70 percent over the next half-decade.

In the short run, it predicts passage of President Trump’s proposed tax package that will be “light on reform” and tilted toward tax cuts.

Despite “a world of insecure stability,” the report, published for a 36th consecutive year, sees the survival of the euro currency. It bets that Italy stays in the euro zone and forecasts 2 percent growth and 2 percent inflation for the United States.

“All three key risks that we saw on the horizon — elevated and rising debt levels, monetary policy exhaustion and the ascent of populism — have either materialized or become more real,” the report said. “Who would have thought that the U.K. would vote for Brexit, Donald Trump would be elected president, Italy would vote ‘no’ on reform, and that markets would like it?”

The report is a product of the investment firm’s three-day forum in May that included Pimco investors, analysts, executives and speakers, including former treasury secretary Lawrence H. Summers, former Federal Reserve chairman Ben S. Bernanke and former European Central Bank president Jean-Claude Trichet.

Stocks and bonds are expensive due to “lots of good news” priced into markets, according to Pimco. Stocks have climbed to record highs over the past few months, fueled by expectations that Trump would promote pro-business policies and expectations. The market also benefited by strong first-quarter corporate earnings.

The United States has experienced 11 recessions in the 70 years since the end of World War II, with the last recession occurring in 2008. There have been 14 five-year periods since the war.

Pimco, known for its fixed-income bond funds, says that when a recession does arrive, governments will be hard-pressed for solutions because of years of low interest rates. Both the Federal Reserve and the European Central Bank have created easy money by reducing interest rates to near- zero percent. The lower borrowing costs have helped drive up asset prices but have also promoted deficit spending by reducing the interest that governments pay on their debt.

“In contrast to prior downturns, there’s not a lot of tools in the policy tool-kit,” said Richard Clarida, one of the report’s authors and a Pimco managing director. Clarida called the potential lack of options in monetary policy akin to “driving-without-a-spare-tire.”

“People need to remember that in 2001, the Fed cut interest rates by five percentage points. In the next recession, the Fed is not going to have room to cut the interest rate by five percentage points.

“Our bottom line is markets are a bit too relaxed,” Clarida said. “They are priced, if not for perfection, certainly for a continued run of good luck.”

He said Pimco, with its emphasis on bonds and fixed income, has amped up its cash holdings so it has enough liquidity to buy up assets when the price drops.

“We think that’s going to pay dividends when markets get choppy,” Clarida said.