'I don’t like bonds, I don’t like most stocks': Bill Gross

Wed Aug 3, 2016 12:02pm EDT
 
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By Jennifer Ablan

NEW YORK (Reuters) - Investors should cut risk by placing money in real assets and accept lower returns, given that markets no longer offer double-digit gains in a zero interest-rate environment, said Bill Gross, a portfolio manager at Janus Capital Group Inc (JNS.N: Quote).

"Negative returns and principal losses in many asset categories are increasingly possible unless nominal growth rates reach acceptable levels," Gross said in his latest Investment Outlook note published Wednesday.

"I don’t like bonds; I don’t like most stocks; I don’t like private equity. Real assets such as land, gold, and tangible plant and equipment at a discount are favored asset categories."

The views from Gross come in the wake of the recent run-up in the benchmark Standard & Poor's 500 index and Treasury bond market rally.

His views also follow remarks by Jeffrey Gundlach, the chief executive of DoubleLine Capital. Last week, Gundlach told Reuters: “The artist Christopher Wool has a word painting, 'Sell the house, sell the car, sell the kids.' That’s exactly how I feel – sell everything. Nothing here looks good.”

Gross, who runs the $1.5 billion Janus Global Unconstrained Bond Fund, said capitalism cannot function efficiently at zero-bound rates.

He reiterated low interest rates may raise asset prices, but they destroy savings- and liability-based business models in the process.

"Banks, insurance companies, pension funds and Mom and Pop on Main Street are stripped of their ability to pay for future debts and retirement benefits," he said. "Central banks seem oblivious to this dark side of low interest rates. If maintained for too long, the real economy itself is affected as expected income fails to materialize and investment spending stagnates."   Continued...

 
Bill Gross speaks at the Morningstar Investment Conference in Chicago, Illinois, June 19, 2014. REUTERS/Jim Young