Bill Gross warns that markets are overpriced and don’t reflect outlook for global growth
'High rates of growth, and the productivity that drives it, are likely distant memories from a bygone era,' he says in monthly investment outlook.
Stocks and other assets are priced at unrealistic levels based on the outlook for global growth, according to billionaire bond guru Bill Gross.
“Equity markets are priced for too much hope, high-yield bond markets for too much growth, and all asset prices elevated to artificial levels that only a model-driven, historically biased investor would believe could lead to returns resembling the past six years,” Mr. Gross, manager of the Janus Global Unconstrained Bond Fund, wrote in a monthly investment outlook released Thursday. “High rates of growth, and the productivity that drives it, are likely distant memories from a bygone era.”
President Donald J. Trump said during his campaign that he would revive U.S. growth to 3% or more, which helped fuel a surge in stocks after his election. The S&P 500 Index was still up almost 10% through Wednesday since his surprise victory, even after retreating about 2% from its March 1 all-time high. The index trades at a trailing price-to-earnings ratio of more than 20, higher than before the 2008 financial crisis, according to data compiled by Bloomberg.
In his note, Mr. Gross cited an International Monetary Fund report that says growth is still impaired by slow business investment and an aging population with reduced demand for consumption. IMF managing director Christine Lagarde sounded more optimistic about the world economic outlook in a speech Wednesday in Brussels, citing rising momentum in advanced economies, manufacturing activity and higher commodity prices.
Mr. Gross’ $2 billion unconstrained bond fund is up about 3.7% in the past year and has returned 5.1% since he took over in October 2014 after leaving Pacific Investment Management Co.
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