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 predicted that stocks and bonds would return less than 5% in 2013, a forecast he reaffirmed from his December investment outlook.
Gross forecast unemployment would stay at 7.5% or higher in 2013. For everyday investors, persistent high unemployment can mean slower economic growth and potentially lower investment returns across many asset classes.
Yes — one of Gross's 'fearless forecasts' was that gold goes up. He recommended commodities such as gold (and oil) as potential sources of return in a low-growth environment.
Gross pointed to globalisation, technological and demographic changes as structural headwinds that could restrict growth. He said these forces could lower real economic growth below 2% in the US and other developed nations, making sustained strong returns harder to achieve.
He recommended seeking returns from commodities (like oil and gold), inflation-protected bonds, high-quality municipal debt, and non-dollar emerging market stocks as alternatives in a constrained growth environment.
The article reported 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 increased by 4.8%.
PIMCO's Total Return Fund gained 10.4% in 2012 and ranked in the 95th percentile among its peers, according to the article.
No — Gross warned that while some growth measures might help, 'there may be no miracle policy drugs this time around' to deliver the quick cures of prior decades, and that structural headwinds cannot simply be wished away.
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