Nothing like it was: Bill Gross with a gloomy investment outlook: “There is hardly any money to be made anywhere in the world” | message
indices in this article
• Corona pandemic has negatively impacted investment opportunities
• US indices already set new records thanks to massive aid from the Fed
• US aid levels cannot be maintained, so investors should focus on Europe
PIMCO co-founder Bill Gross has more than 40 years of investment experience and has made a name for himself in particular with investing in fixed-income securities, which is why he is also known as the bond king. After retiring last year, he now only manages his own assets, but still allows interested investors to share his investment recommendations through his investment outlook.
The corona pandemic has changed the world forever
However, his recently published assessment of the current investment environment was not very rosy. The bleak outlook is due, as expected, to the still rampant corona pandemic, which has turned all layers of economic and social life inside out: “Well, the global economy was tattooed by an invisible virus in 2020 [ ]. And the lives of more than 7.5 billion people have been changed in incredible ways. [ ] The question that arises is, of course, whether things will ever be the way they were before, and if the answer is, probably not, then the race in the financial markets to identify the winners and losers begins “.
According to Gross, the obvious winners were the so-called “Stay at Home” shares, which benefit from the fact that people are increasingly staying in their own four walls. On the other hand, cyclical and value-oriented stocks would either have stagnated or lost value.
US stock exchanges are already setting records again, while European indices are lagging behind
In the following of his report, the stock market expert concentrates on the different market developments in the USA and Europe. While the USA has relied on broad-based financial aid to combat the COVID-19 crisis, including an extremely expansive one Monetary policy as well as payments of additional benefits to US citizens, targeted support has been used for selected companies in Europe. Accordingly, the US indices S&P 500 and NASDAQ Composite have already reached new highs despite Corona, while the leading European stock exchanges such as the DAX, FTSE or CAC have not yet found their way back to their old heights, and there is accordingly even more upside potential.
How much longer can the Fed maintain its massive stimuli?
Because, according to Gross, US investors should now ask themselves “how long this US advantage will continue to exist in the coming years – regardless of the presidential election”. The bond king believes the Federal Reserve’s powder is largely, “if not completely,” a waste of time. If the massive financial aid is still used in the coming years, a deficit of “5 to 6 trillion US dollars” would be necessary. And in order to reduce this in turn to “3 to 2 trillion US dollars”, a “fiscal brake” would have to be used, which would have to be offset by an annual growth of “at least 6% to 7%” over several years which, in the opinion of Bill Gross, would be unrealistic.
This would also result in a further drastic drop in real interest rates, which would necessitate quantitative easing to an “unacceptable extent”.
Instead, investors should take a defensive position
Because of all these factors, the former PIMCO expert now advises investors to adopt a defensive strategy. The Bonds King recommends “banking on sectors that have been avoided so far, such as tobacco, banks and even – yes, indeed, foreign companies that are listed on European stock exchanges and that have not yet skyrocketed, fed by the hope that normal economic prosperity is returning, followed by even lower artificial real interest rates. There is hardly any money to be made anywhere in the world – whether with the COVID-19 vaccine or without. ”
Martina Köhler / Finanzen.net editorial team
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