Bill Gross made his fortune managing bonds. But the so-called king of bonds says his asset class is, bluntly, rubbish.
Gross, co-founder of Pacific Investment Management Co., wrote in an investment perspective posted on his website that the performance of the TMUBMUSD10Y of the Treasury at 10 years,
he has nowhere else to climb.
“How fast is the real question, because even if they increase by 10 basis points a year over the next decade, a bond investor could match an indexed bond fund. But they will go up faster than that and probably much faster, ”says Gross.
Gross says the reduction in the Fed’s $ 120 billion monthly asset purchase program is likely to end by the middle of next year, as inflation remains above 2% and the economy continues to recover. “True, this still stops buying 600 or 700 billion dollars of Treasury debt and mortgage, but central banks and foreign investors have been selling in recent years and fiscal deficits of 1.5 trillion dollars are perhaps a minimum of what we can expect in the US, “he said.
Gross said a 2% return in ten years would equate to a price loss of between 4% and 5% and a total negative return of 2.5% to 3%. “Cash has been rubbish for a long time, but now there are new candidates for investment rubbish,” he said.
As for stocks, it’s best for earnings growth to be double-digit more “or they could join the garbage truck,” he added.
The S&P 500 SPX,
has risen 20% this year and more than doubled from its March 2020 low.