PIMCO Co-Chief Investment Officer and Founder Bill Gross painted a gloomy picture of U.S. investment prospects during his opening keynote address at the Morningstar Investment Conference in Chicago on June 8.
The high-profile bond portfolio manager encouraged the audience of financial advisors to seek investment opportunities outside the Treasury market and away from dollar-based markets more generally.
Gross (left) noted that real, or inflation-adjusted, interest rates, as indicated by pricing in the 5-year market for Treasury Inflation Protected Securities (TIPS), have fallen from about 4% in October 2008 to minus 0.5% today.
Such negative rates benefit debtors, including the U.S. government, but amount to “picking the pockets” of investors and savers, he emphasized. The drop in interest rates has put a damper on the prospects for U.S. stocks as well as bonds, he added, since equity prices cannot be expected to benefit from further drops in rates.
“If real interest rates cannot go much lower, stocks are on their own. The bird is out of the nest,” Gross said.
“Get out of [negative] real interest rate space, and find something more attractive,” he suggested. In particular, Gross cited Brazil, Mexico, Canada and Germany as countries meriting investor interest.