Superstar bond fund manager Bill Gross says that investors should stick with safe stocks and bonds in the United States, thanks to slow economic growth.
But the PIMCO managing director also recommends investing in emerging markets. Granted, he cites “selectively chosen emerging market commitments where nominal GDP growth prospects are tilted upward as opposed to gravitating to new lower norms,” in his monthly commentary.
But that would still seem at odds with conservative investing.
As for the United States, “a 3 percent nominal GDP ‘new normal’ means lower profit growth, permanently higher unemployment, capped consumer spending growth rates and an increasing involvement of the government sector,” Gross writes.
That government intervention “substantially changes the character of the American capitalistic model,” he says.
As for the investment environment, “An investor should remember that a journey to 3 percent nominal GDP means default/haircuts for assets on the upper end of the risk spectrum,” Gross says.
It also means “extremely low-yielding returns for government and government-guaranteed assets at the bottom end.”
As a result, Gross writes, “There is no investment potion for this new environment other than steady income-producing bond and equity investments in companies with strong balance sheets and high dividend yields.”
Not everyone is pessimistic like Gross. William O’Neil, founder of Investor’s Business Daily, tells Moneynews that stocks are headed higher.
“On March 12, I think it (the market) turned, and that was the beginning of a new bull market. Markets are always perceptive. They’re looking ahead.”
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