The
bull market is dead and asset prices will fall drastically in 2015, Bill Gross claimed
in his January outlook for Janus Capital.
PIMCO’s former bond king projected a pessimistic viewpoint for the next 12 months in his usual eccentric tone, announcing that “the good times are over.”
“When the year is done, there will be minus signs in front of returns for many asset classes,” Janus’ Gross wrote. “There comes a time when common sense must recognize that the king has no clothes, or at least that he is down to his Fruit of the Loom briefs, when it comes to future expectations for asset classes.”
He added that rapid credit growth, low interest rates, and tighter risk spreads have fueled the bull market for the past few decades, with central banks buoying prices in times of financial crises.
However, this “debt supercycle”—driven by “consistently looser regulatory policies” and quantitative easing—will meet its demise, Gross said. And the next 12 months will prove to be the turning point.
“There comes a time when zero-based, and in some cases negative yields, fail to generate sufficient economic growth,” he said.
PIMCO’s former CIO said investors would eventually hit a point where there’s too little return for too much risk, and turn to less risky and cash-like assets.
When asset returns dip into the negatives, Gross suggested investors consider high-quality assets with stable cash flows, such as treasury and corporate bonds, and stocks of companies with little debt and attractive dividends.
“With moments of liquidity having already been experienced in recent months, 2015 may see a continuing round of musical chairs as riskier asset categories become less and less desirable,” Gross wrote.
Gross advised investors to stay vigilant for falling prices and be content with dwindling returns in the new year.
After leaving PIMCO last fall, Gross now manages the $1.2 billion Janus Global Unconstrained Bond Fund. According to Morningstar, the fund has lost 0.8% in the past three months.
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