The CIO of PIMCO, the world’s largest fixed interest manager, which has been one of the big beneficiaries of the flight to ‘safety’ since 2008, is downbeat about prospects for the markets this year.
Bill Gross said in a Twitter post last week that he expected both shares and bonds in the US to return less than 5 per cent during 2013, primarily due to persistent high unemployment.
The message reaffirmed what he wrote in his December investment outlook, which said “structural headwinds” might lower real economic growth below 2 per cent in the US and other developed nations.
The S&P Index was up 14 per cent last year while the bond indices averaged a 5.2 percent increase. Gold rose 4.8 percent.
Gross posted: “2013 Fearless Forecasts: 1) Stocks & bonds return less than 5%. 2) Unemployment stays at 7.5% or higher 3) Gold goes up.”
With globalization, technological and demographic changes restricting growth, investors should seek returns from commodities such as oil and gold, U.S. inflation-protected bonds, high-quality municipal debt and non-dollar emerging market stocks, Gross wrote in his December outlook article.
“While there are growth potions that undoubtedly can reduce the fever, there may be no miracle policy drugs this time around to provide the inevitable cures of prior decades,” Gross wrote. “These structural headwinds cannot just be wished away.”
The two most successful fund managers since 2008, in terms of net inflows, as investors sold down active equities and other growth assets, are PIMCO and the big index manager Vanguard. PIMCO has about $US1.9 trillion under management and Vanguard about $US1.7 trillion.