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Bill Gross sees possibility of stagflation, says he wouldn’t be a buyer of stocks here


Bill Gross, a billionaire investor, listens to the Milken Institute Global Conference, Beverly Hills, California (USA), May 3, 2017.

Reuters| Reuters

Bill Gross is the former bond king, and co-founded Pimco’s fixed income company. He said he believes there could be stagflation, although he won’t invest in stocks right now.

According to the 77-year old investor, although Federal Reserve intends to combat rising inflationary pressures it is also concerned that excessive rate increases could cause too much downward pressure on asset values, leading ultimately, to turmoil in financial markets.

Gross said that they are limited by what they have the ability to do. Gross spoke on Thursday at CNBC that the historical inflation rate is too high to allow for any interest rate increases. “Worldwide Exchange”Interview with Brian Sullivan.

It is my realistic belief that the stock markets were driven in part by low interest rates. Gross added that to the extent you increase them by even 50 to 100 to 150 base points… it has a significant effect on financial discount the forward stream earnings so they need to be careful.”

Gross explained that persistent inflation could be caused by a world of low interest rates.

“It perhaps means stagflation. Gross explained that there has not been inflation higher than 3% or 4% in a while.

Consumer prices rose 7.5% in January compared with a year prior, and the Fed’s preferred inflation gauge saw its highest 12-month growth since 1983.

Fed Chairman Jerome Powell said Wednesday that he still sees a series of quarter-percentage-point increases coming, but noted the Russia-Ukraine war has injected uncertainty into the outlook.

CME group data shows that markets fully anticipated a rate rise at the March 15-16 meeting, but they are now expecting lower expectations for the rest.

Traders are now pricing in five quarter-percentage-point increases that would take the benchmark federal funds rate from its current range of 0%-0.25% to 1.25%-1.5%.

Gross stated that Gross is a careful stock-picker and that he has a lot oil pipelines. He also owns partnerships that are exempt from tax.

I wouldn’t buy stocks from them. Gross explained that she would be cautious investors and not a buyer of stocks. Gross said that there are alternatives to this, such as selling bonds or buying stocks, but it is possible to make a good return and not take on any risk.

Gross published his memoir “I’m Still Standing: Bondking Bill Gross and The PIMCO Express” on Thursday. The investor managed Pimco’s Total Return Fund before leaving to join Janus Henderson in 2014.