In what may be the most brilliant news for stocks in a long time, star bond fund manager Bill Gross is suggesting that the 30-year bull market in fixed-income securities is ending and a new bull market is emerging in equities.
“Though Gross, who runs Pacific Investment Management Co.’s $214 billion Pimco Total Return Fund, would never tell you to buy stocks, isn’t that what he means?” writes David Pauly, a columnist for Bloomberg News.
“Pimco, which Gross co-founded, more or less said as much in December. It announced the Pimco Global Opportunities Fund, which will invest in stocks, though it also will buy bank loans, junk bonds and distressed securities.”
Stocks are overdue for better times after a 10-year span that featured the dot-com crash followed by the more recent Wall Street-induced credit crunch. The market certainly has improved during in the last 12 months.
“The benchmark Standard & Poor’s 500 Index is up more than 70 percent from its recession low a year ago this month,” writes Pauly.
“Stocks have improved along with the American economy, which grew 5.6 percent in the fourth quarter as corporate profits jumped 8 percent.”
Favorable news is continuing the trend.
Shares of U.S. Steel Corp., a backbone-industry company, have climbed almost 40 percent since Feb. 4, when it was at $44.07. It recently traded at $69.71.
Apple Inc., maker of iPods and iPads, may hit $300 from its current price of about $239.54, Credit Suisse Group AG said.
“While Gross is giving stocks an indirect plug, he’s still buying bonds. He recommends, for instance, longer-term securities of Germany and Canada, whose governments are more frugal than that of the U.S. Pimco’s $1 trillion or so of assets are still overwhelmingly in bonds,” writes Pauly. “Let’s wait to see if Pimco makes an even bigger splash in stocks.”
Others agree that a bull market is in the offing for equities, as MarketWatch reports that publicly-traded companies are now hoarding cash to bolster their balance sheets.
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