New investment professional Bill Gross, who has just played with his neighbor, has a view of the stock market and the bulls will not like it.
The legendary bond fund manager, formerly admirably referred to on Wall Street as the “bond king,” hasn’t been laser-focused on market riots since he retired from Janus Henderson in 2019, until recently.
But recent market moves have apparently forced Gross to hand over his monthly market outlook, not to mention the conclusion of his legal dispute with his neighbor, which included his explosion of the themed song “Gilligan’s Island.” “.
“But far from Gilligan, the Skipper and the SS Minnow and other more important issues like the reviews of‘ Wonder Woman 1984 ’(100% green tomatoes, don’t expect to see) and perhaps the Bubblicious stock market,” Gross writes.
“So why are the stocks so high and the OPCs like DoorDash DASH,
shot up 80% on the first day of broadcast and Airbnb ABNB,
… Robinhood and the impulse rule, ”he concludes.
“This market is driven, yes, by intense speculation, but also by business profits driven by the central bank which, when discounted to the present value, almost zero, at negative real interest rates, produce record stock prices.” . Gross wrote, referring to rates hovering around 0% and 0.25% and real yields, bond yields representing inflation, are trading in sub-zero territory.
This means that investors earn very little by saving or are willing to lose money for the perceived security of maintaining inflation-adjusted public bonds.
In this world, investors are being driven to riskier areas of the market, Gross points out.
“However, my point is that the drop of 200 basis points in real 10-year treasury yields since January 2019 has been instrumental in the 50% increase in the price of the S&P 500 over the same period.” , wrote Gross, referring to the 10-year Treasury note TMUBMUSD10Y,
which is below 1%, compared to the aggregate performance of the S&P 500 SPX index,
with 1.6%, FactSet data is displayed.
The 76-year-old investment pro points to Federal Reserve asset purchase programs and other stimulus measures that offer extraordinary support to financial markets, as well as Washington’s tax relief packages, as part of the support to the investment capacity of investors in the face of what they perceive as inflated values.
It also suggests that the market and the economy may become too accustomed to government injections.
He writes:
“And how many tax packages can the stock market endure before it realizes that GDP is now like an opioid, depending on more and more Washington dollars that turn our Republican capitalist supply monster into a“ gasp! “” Sluggo similar to Europe? “
For now, it looks like Gross attributes most of the recent gains to the Dow Jones Industrial Average DJIA,
the S&P 500 and the growing companies in the Nasdaq Composite Index COMP,
including Tesla TSLA,
at high and negative interest rates in place.
It’s unclear how long the pace of markets will last in 2021, however, Gross points out.
His January report comes after Gross and his partner, Amy Schwartz, received an order from High Court Judge Kimberly Knill not to violate the noise provisions of the Laguna Beach City Code or to play music on outdoor speakers. he ordered them to stay at least 16 feet. away from its coastal neighbor.
The sentence came from Gross’ neighbor Mark Towfiq, alleging a “specific harassment campaign” after complaining about a large glass statue he said was erected without permission. Gross also performed the theme of the sitcom Gilligan’s Island, and other loud music, repeated in retaliation for Towfiq’s complaint, according to court documents.