Bill Gross sees a recession on the horizon. Bill Gross, who co-founded Pimco, the world’s largest fixed-income investment fund has recently warned of tough times ahead for US stocks and the bond market as fiscal and monetary stimulus loses its “oomph”.
Bill Gross’s Pimco has $1.88 trillion assets under management as of September 30, 2019.
“Bill Gross, who co-founded Pimco, the world’s largest fixed-income investment fund has recently warned of tough times ahead for US stocks and the bond market as fiscal and monetary stimulus loses its oomph”
Famed investor, Bill Gross has been active in the media stage following his retirement from the fund in February this year.
Bill Gross sees a recession on the horizon and he doesn’t believe the Fed can do much more in the next economic slump to keep asset prices inflated.
Speaking candidly in early November Bill Gross referred to the Fed’s transition to monetary accommodation as “Baby QE”, which entails the Fed expanding its balance sheet to the tune of $60 billion worth of Treasury bills each month.
That is a big baby, bearing in mind that $60 billion worth of Treasury bills purchases per month is significant even by the Fed’s previous asset purchase programs.
But perhaps Bill Gross is highlighting the fact that the laws of diminishing returns are now applicable to QE, the greater magnitude of QE the lesser impact it is likely to have going forward.
“Bill Gross sees a recession on the horizon and he doesn’t believe the Fed can do much more in the next economic slump to keep asset prices inflated”
“Baby QE won’t push up all stocks” he added, “It will help to salvage a day or two of repo madness”, said Bill Gross.
Bill Gross sees a recession on the horizon with monetary stimulus being less effective
However, renewed Fed stimulus in October has lifted fixed-income markets, flattening yields to record lows and kept stocks hovering near record highs despite the earnings recession.
Financial markets continue to be the Fed’s perpetual motion machine. QE can keep the bull market running and asset prices propped up, albeit less each time.
“Gains next year would be much harder to come by” – Bill Gross
So could an inflection point be nearing as Bill Gross sees a recession on the horizon?
Bill Gross reckons that gains will become more elusive in 2020.
“Gains next year would be much harder to come by” said Bill Gross in his latest FT interview.
Bill Gross also noted that central banks are becoming aware of the political and economic backlash that emergency monetary policy, with its persistently low-interest rates and endless QE, is having on savings, the distortion of risk measures and social cohesion. If fact QE, has become such a political hot potato that the Fed would rather refer to it as something else.
Bill Gross sees a recession, but how low can stocks fall with monetary easing exhausted and fiscal stimulus spent?
Stocks in the US would be “flat to down 10 percent” in 2020, he said.
What about the yield on the benchmark 10-year Treasury note? Bill Gross is forecasting the yield to end the year at 1.75 percent.
His favorite sector for 2020 is natural gas stocks such as Energy Transfer, a Dallas-based pipeline operator, and MPLX, a vehicle formed by Marathon Petroleum.
US presidential election should produce “volatile opportunities” in the healthcare sector, according to Bill Gross.