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Pimco’s Gross: Investors Will Be Lucky to Get 5% Returns

Wednesday, 30 Nov 2011 12:21 PM

Pimco's Bill Gross says most investors will be lucky to get a 5 percent return in their portfolios for the next several years thanks to the growth-constricting debt problems in the U.S. and Europe.

"If you can get long-term returns of 5 percent from either stocks or bonds, you should consider yourself or your portfolio in the upper echelon of competitors."

Investors, Gross says, should recognize that Euroland's problems are global and secular in nature, reflecting worldwide deleveraging and growth dynamics that began in 2008.

Bill Gross
(Pimco file photo)
"It will be years before Euroland, the United States, Japan and developed nations in total can constructively escape from their straightjacket of high debt and low growth," Gross wrote in a note to investors.

Gross also says that global growth will likely remain stunted, interest rates artificially low and investors continually disenchanted with returns that fail to match expectations.

“Investors should consider risk assets in emerging economies, such as Brazil and Asia, and bonds in the strongest developed economies, where the steep yield curve may offer opportunities for capital gains and potentially higher total returns,” he says.

Because of Euroland's family feud, too much global debt, deflationary policy solutions that “are in some cases too little, in some cases ill conceived, and in many cases too late, financial markets will remain low returning and frequently frightening for months/years to come," says Gross.

Bloomberg reports that the Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret, not revealing which banks were in trouble so deep they required emergency loans of a combined $1.2 trillion on Dec. 5, 2008, their single neediest day.

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