- Investment legend Bill Gross said there was “little money to be made almost anywhere in the world” in his latest investment outlook note.
- The well-known bond and fixed income investor has said that much, if not all, of the US fiscal stimulus is over.
- Investors should play the defense by turning to “avoided sectors” such as tobacco, banks and some European stocks.
“There is little money to be made almost anywhere in the world – Covid 19 vaccine or not. ”
That’s according to legendary fixed-income and bond investor Bill Gross, in his latest investment outlook note titled “Tattooed,” in which he compared the effects of the coronavirus on the economy to a tattoo.
The billionaire investor and co-founder of PIMCO said the US fiscal stimulus, which was putting money in the pockets of working people and supporting US stock indices higher than global stocks, is fading.
Gross said investors will have to play the defense going forward by looking at “shunned sectors” like tobacco and banking. They may even envision “foreign companies listed on European stock exchanges that haven’t skyrocketed on dreams of returning economic prosperity followed by even lower artificial real interest rates,” he said. added.
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He said the US fiscal stimulus was bigger than that of most European countries, which, together with real rates rising, could explain why US indices like the Nasdaq and the S&P 500 are up 5% to 25%. , while global stock indexes like the FTSE, DAX and CAC 40 are down 5% to 15% on average.
But now much, if not all, of the U.S. stimulus is over, Gross said, and the country would need even more money than it needed before to continue supporting the economy. .
“To continue to pump the economy in the years to come, it would take not only a deficit of $ 4 trillion, but a deficit of $ 5 or 6 trillion,” the investor wrote. “And reducing the deficit to 3 or 2 trillion would in fact be known in the discourse of economists as a
fiscal drag ”and should be offset by at least 6% to 7% real annual growth for years and years in the private sector – a Trumpian or Biden dream, I guess but not realistic. ”
Real interest rates are also expected to fall steadily in this scenario, with 5-year TIPS potentially falling to -230bp, which Gross said would require “quantitative easing of unacceptable proportions”.
He concluded: “The tattoo of our global economy cannot be easily removed for years to come. “