Fed and its projected rate hikes 'likely exaggerated,' says Bill Gross

Billionaire bond manager says a rate above 2% risks destabilizing the U.S. economy.
MAR 22, 2018

Don't believe the Fed. That's what Bill Gross, the billionaire bond manager with Janus Henderson Group Plc, said in an investment outlook released Thursday. "The Fed's purported three to four hikes this year beginning in March are likely exaggerated," wrote Mr. Gross, who runs the $2.2 billion Janus Henderson Global Unconstrained Bond Fund. "The U.S. and global economies are too highly leveraged to stand more than a 2% Fed Funds level in a 2% inflationary world." The Federal Reserve raised rates by 0.25 % Wednesday in response to a strong U.S. economy, the first hike since Jerome Powell became chairman last month. The median forecast of members of the Federal Open Market Committee is for more than three hikes for all of this year and three more next year, putting the Fed Funds target rate at 2.125% rate by the end of 2018 and 2.875% at the end of 2019. A rate above 2% risks destabilizing the U.S. economy, slowing emerging market growth and prompting premature rate hikes by the European Central Bank and other developed economies, Mr. Gross said. "The Fed, under Jerome Powell, hopefully has learned that lesson, and should proceed cautiously, as must his counterparts around the globe," he wrote. The U.S. 10-year rate will fluctuate around 3% for most of 2018, Mr. Gross said. After the Fed decision it spiked above 2.9% Wednesday, the highest this month, before dropping later in the day. In January, when rates on the 10-year passed 2.5%, Mr. Gross pronounced the end of a 35-year bond bull market. "Still, in my mind, this is a hibernating global bear bond market, not a beast," Mr. Gross wrote in Thursday's note. "That may come later." Mr. Gross's unconstrained fund, which is structured to avoid losses in a rising rate environment, has returned 0.16% this year through March 20. It returned an annual average 2.4% over the last three years, outperforming 55% of its Bloomberg peers.

Latest News

Advisor moves: Wells Fargo FiNet lands $580M Ameriprise team
Advisor moves: Wells Fargo FiNet lands $580M Ameriprise team

LPL Financial and Raymond James also add independent advisors from Osaic and Edward Jones in Michigan and Arizona.

M1 Advisor bets AI can serve clients wealth managers turn away
M1 Advisor bets AI can serve clients wealth managers turn away

The SEC-registered RIA advises on more than $1 billion in client assets, with no advisory fee through 2027 and no human financial advisors.

Wirehouses losing more advisors so far in 2026: Report
Wirehouses losing more advisors so far in 2026: Report

The four wirehouse firms lost 1,449 experienced advisors and recruited 932 in the first six months of the year, according to Diamond Consultants.

RIA moves: Merit, Hightower and Trilogy announce billion-dollar additions
RIA moves: Merit, Hightower and Trilogy announce billion-dollar additions

Merit's 10th Commonwealth addition deepens its Western New York reach, while another Hightower partner joins its Signature Wealth platform in Michigan.

SEC spares fund giants charges but warns on Exxon climate campaign
SEC spares fund giants charges but warns on Exxon climate campaign

Report on Climate Action 100+ signals risk for passive managers' 13G status heading into the 2027 proxy season.

SPONSORED Built on insurance experience to deliver on long-term promises

Knighthead Life entered the market with a competitive MYGA. A strong launch earned advisor confidence and paved the way for FIAs.

SPONSORED In the Age of AI, Trust Becomes the Advisor's Greatest Asset

As AI makes financial information more accessible than ever, Lana Hock explains why human judgment, trust, and empathy remain the qualities clients value most in a financial advisor