BILL Gross, the manager of Pacific Investment Management Co, the world's biggest bond fund, expects stocks and bonds to return less than 5 per cent in 2013 as high unemployment persists.
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.