LAGUNA BEACH, Calif., Sept. 21, 2023 /PRNewswire/ — Legendary bond and fixed income investor William H. (Bill) Gross today released a new Investment Outlook, “Call Me Ken“. In his latest Outlook, Mr. Gross writes that he disagrees with the positive outlook for bonds:
“A majority of vocal professional investors seem to expect a peak in short term rates in the next few weeks and for the Fed to lower yields several times in 2024, perhaps initiating a mini-bond bull market in the process,” Mr. Gross believes. “While I agree that the Fed is done at 5½%, I think that bonds are headed for a third straight year of losses and that portfolios should own more pipeline MLPs (Master Limited Partnerships) and fewer Treasury and corporate bonds.”
Mr. Gross cites four reasons for his outlook:
1) “Expansive” fiscal policy has resulted in an expected $2 trillion deficit for 2023, with the recipients of the money – consumers – spending a lot of it. “The government first threw money out of a helicopter and almost all of it has been spent, sending inflation beyond all prior expectations. Taming it and lowering it to 2% will be most difficult and a bond bull market under those circumstances is hard to envision in a 3% future.”
2) He questions who will buy the 30% of existing Treasuries ($32 trillion) that will mature over the next 16 months at existing yield levels: “While the Fed may hint at a time in 2024 where they can reduce short term yields, it may not be enough to lower 10 year Treasuries below 4.0%.”
3) He believes the 10 year Treasury is already priced for 2% inflation: “At 4.30% a possible 2-2½% Fed Funds rate plus what has historically been a 1.35% term premium (much like the equity risk premium to reflect the possibility of higher yields and lower prices) puts a 10 year close to 4% under the best of possible scenarios.”
4) Finally, Mr. Gross believes, “Foreign bond markets have their own problems with high debt ratios and still artificially low yields as in Japan.”
Full text of Bill Gross’s September 21, 2023, Investment Outlook can be found at his website.
About Bill Gross
Bill Gross has been a pioneer in fixed income investing for more than 40 years. He co-founded PIMCO in 1971 and served as managing director and chief investment officer until joining Janus Henderson Investors in 2014. He retired in 2019 to focus on managing his personal assets and private charitable foundation. Throughout his career, he has received numerous awards, including Morningstar Fixed Income Manager of the Decade for 2000 to 2009 and Fixed Income Manager of the Year for 1998, 2000 and 2007. Mr. Gross became the first portfolio manager inducted into the Fixed Income Analysts Society’s Hall of Fame in 1996 and received the Bond Market Association’s Distinguished Service Award in 2000. In 2011, Institutional Investor magazine awarded him the Money Management Lifetime Achievement Award. Mr. Gross oversees the $450 million-asset William, Jeff and Jennifer Gross Family Foundation, which annually donates up to $21 million to non-profits involved in humanitarian causes, health care, arts, and education. For more information or to view Investment Outlook archives, please visit https://williamhgross.com. For information about Mr. Gross’s philanthropic activities through the William, Jeff and Jennifer Gross Family Foundation, please visit https://grossfamilyfoundation.com/. Order his book “I’m Still Standing: Bond King Bill Gross and the PIMCO Express” on Amazon.com.
SOURCE Bill Gross