Tough times ahead, warns Pimco chief
He reaffirmed what he wrote in his December investment outlook, which said "structural headwinds" could lower real economic growth below 2 per cent in the US and other developed nations.
The leading Standard & Poor's 500 Index gained 14 per cent in 2012, including reinvested dividends. The Bank of America Merrill Lynch US Corporate and Government Index was up 5.2 per cent, and gold 4.8 per cent.
Mr Gross wrote: "2013 Fearless Forecasts: (1) Stocks and bonds return less than 5 per cent. (2) Unemployment stays at 7.5 per cent or higher. (3) Gold goes up."
With globalisation, technological and demographic changes restricting growth, investors should seek returns from commodities such as oil and gold, inflation-protected bonds, high-quality municipal debt and non-dollar emerging market stocks, he wrote in his outlook article, reiterating earlier recommendations.
"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.
"These structural headwinds cannot just be wished away."
Pimco's Total Return Fund gained 10.4 per cent in 2012, ranking in the 95th percentile among its peers.
Frequently Asked Questions about this Article…
Bill Gross forecasted that stocks and bonds would return less than 5% in 2013, a view he reiterated from his December investment outlook.
PIMCO cites 'structural headwinds' — including globalisation, technological change and demographic shifts — that could push real economic growth below 2% and make a rapid recovery more difficult.
In his 2013 'Fearless Forecasts', Bill Gross predicted unemployment would stay at 7.5% or higher.
PIMCO forecasted that gold would go up in 2013. Given the firm’s view of limited growth and structural risks, it recommended commodities like gold as potential sources of return.
PIMCO suggested seeking returns from commodities such as oil and gold, inflation-protected bonds, high-quality municipal debt, and non-dollar emerging market stocks.
The S&P 500 gained 14% in 2012 including reinvested dividends. The Bank of America Merrill Lynch US Corporate and Government Index rose 5.2%, and gold was up 4.8% that year.
PIMCO's Total Return Fund gained 10.4% in 2012 and ranked in the 95th percentile among its peers, according to the article.
PIMCO's phrase suggests that traditional policy measures may not quickly fix the deeper structural issues (globalisation, technology and demographics) that are restraining growth, so investors should consider asset classes intended to weather a slower-growth environment.
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