Bill Gross, co-founder and co-chief investment officer of Pacific Investment Management Company (PIMCO), adjusts his sunglasses as he arrives to speak at the Morningstar Investment Conference in Chicago
NEW YORK (Reuters) – The bull market “supercycle” for stocks and bonds is approaching an end, as the unconventional monetary policies that have bolstered asset prices since the financial crisis are running out, widely followed investor Bill Gross said on Monday.
The attempt by global central banks to cure a debt crisis with more debt doesn’t have much further to run, which will end a rally that’s lasted three and a half decades, Gross said in an investment outlook for Janus Capital Group Inc..
“Credit based oxygen is running out,” Gross wrote in the outlook titled, “A Sense of an Ending,” in which he compared the final stages of the financial market cycle with his own mortality.
Gross, who turned 71 in April, wrote: “A 70-year-old reads the obituaries with a self-awareness, as opposed to an item of interest. Some point out that this heightened intensity should make the moment all the more precious and therein lies the challenge: Make it so; make it precious; savor what you have done – family, career, giving back – the ‘accumulation’ that (British author) Julian Barnes speaks to.”
Gross, manager of the $1.5 billion Janus Global Unconstrained Bond Fund, has made similar warnings on stocks and bonds before and acknowledged they’ve come too early.
In May 2013, Gross, who at the time was manager of the Pimco Total Return Fund, the world’s largest bond fund, jolted Wall Street participants on social media with a Twitter post saying: “The secular 30-yr bull market in bonds likely ended 4/29/2013.”
On Monday, Gross said successful managers who are neither permanently optimistic or pessimistic on the market have spoken to a “sense of an ending” as well.
“Stanley Druckenmiller, George Soros, Ray Dalio, Jeremy Grantham, among others, warn investors that our 35-year investment supercycle may be exhausted.”
Gross recommended that investors should stop focusing on price appreciation and, instead, look to “mildly levered income,” such as his recommendation to short German government debt.
“I merely have a sense of an ending, a secular bull market ending with a whimper, not a bang. But if so, like death, only the timing is in doubt,” Gross said.
David Schawel, vice president and portfolio manager of Square 1 Financial, said about Gross’s latest prognostication: “I think it’s obvious that going forward, returns are going to be lower across asset classes. However, it’s proven very difficult to guess the timing, as the last few years have shown.”
(Reporting by Jennifer Ablan; Editing by Bernadette Baum)
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