- Investing legend Bill Gross said in his recent investment outlook note that “there is very little money to be made anywhere in the world”.
- Renowned bond and fixed-income investor say the U.S. economic stimulus is not over at all.
- Investors should play protection by looking at “neglected sectors” such as tobacco, banks and some European stocks.
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“There is little money to be made anywhere in the world – the Covid 19 vaccine or not.”
According to legendary bond and fixed-income investor Bill Gross, in his latest investment perspective, “Tattoo”, he likens the effects of the coronavirus on the economy to a tattoo.
The billionaire investor and co-founder of Pimco said the U.S. economic stimulus, which pushes money into workers’ pockets and raises U.S. stock indices rather than global stocks, is declining.
Gross said investors need to take the defense forward by looking at “remote sectors” such as tobacco and banks. They “did not lift the sky above the dreams of foreign companies listed on European bores to return to normalcy, and then even consider lower artificial real interest rates,” he said.
He said the US economic stimulus was larger than most European countries, which, along with the real rate rally, could explain why US indices such as the Nasdaq and the S&P 500 are between 5% and 25%, preferring global equity indices. FTSE, DAX and CAC 40 fell by an average of 5% to 15%.
But for the most part now, if the U.S. stimulus is not over at all, the macro is going, and the country needs more money than ever before to improve the economy.
“The economy needs not only a $ 4 trillion deficit, but $ 5 or 6 trillion to sustain itself in the coming years,” the investor wrote. “And reducing the deficit to 3 or 2 trillion is actually called ‘fiscal drag’ when the economist speaks of it and the real annual growth in the private sector over the years and years should be at least 6% to 7%. I think a Trumpian or Bidenian dream is not realistic.”
In this case real interest rates will also have to constantly move lower, with 5-year tips shifting to -230 bps, which will require “quantitative easing of unacceptable ratios,” Gross said.
He concluded: “The tattoo of our global economy will not be easily removed in the years to come.”