Bill Gross: ‘Not the same bull market,’ expect equity returns to subside
Bill Gross, the co-founder of PIMCO, stated that the current U.S. stock market is not the same bull market as before, predicting lower equity returns moving forward. Despite the S&P 500's significant gains, he advised maintaining average stock exposure and focusing on defensive stocks, while also holding a small bond position. Gross highlighted risks such as high valuations and geopolitical tensions, but noted positive factors like inflation nearing the Fed's target. His preferred investments include Annaly Capital Management, DWS Municipal Income Trust, and Allete Inc.
It’s not the same bull market anymore, said American billionaire investor Bill Gross.
The U.S. stock rally that doubled equities’ value over the past five years is losing steam, and investors should expect lower returns – although still positive – from now, the co-founder and former chief investment officer of Pacific Investment Management Co. said in an investment outlook.
The S&P 500 (SP500) has increased 98.84% from five years ago, and 32.70% from just a year ago. It is also up 5.40% from a month ago.
However, earlier this week, Goldman Sachs projected the S&P 500 (SP500) to rise 10% to 6,300 over the next year. Strategists also raised their EPS forecast to $268, an 11% year-over-year increase.
Gross recommended investors to keep exposure to stocks at an average level and to focus on defensive stocks with a small position in bonds.
Gross said that high valuations, geopolitical risks, the U.S. government debt, and possible corporate tax increases are negative headwinds, while some tailwinds include inflation nearing the Fed’s target and artificial intelligence spending.
His favorite investments are Annaly Capital Management (NLY), DWS Municipal Income Trust (KTF), and master limited partnerships (or MLPs).
He also said he likes Allete Inc. (ALE).