Bill Gross has bad news for Treasury bulls, and good news for stock investors.
The bond-market legend warns that the 10-year Treasury yield will struggle to dip below 4.25% as ballooning fiscal deficits and a weaker dollar conspire to keep inflation elevated.
On the flipside, according to Gross, equity markets are likely to continue to grind higher driven by the sheer power of the artificial-intelligence era, even if the Treasury market – or economic growth for that matter – fails to inspire.
“I suggest a ‘little bull market’ for stocks and a ‘little bear market’ for bonds,” the co-founder and former chief investment officer of Pacific Investment Management Co. wrote in an X post on Tuesday. “Stocks are AI dominated and continue to suggest 1-2% economic growth.”
Gross anchors his bond call to historic trends and sees little reason for rates to meaningfully fall from current levels, noting that the 10-year yield typically trades some 1.75 percentage points above consumer price inflation. The rate on the 10-year currently hovers around 4.3%.
U.S. equities have staged a comeback in recent weeks, recovering from an early-April tariff-induced selloff, when President Donald Trump imposed — and subsequently placed a reprieve on — sweeping levies for global trading partners.
The S&P 500 is up more than 3% in 2025 and is slightly below a mid-February all-time high. The tech-heavy Nasdaq 100 has gained more than 5% year to date and was poised to close at a record on Tuesday.
After many retail traders used recent market declines as an opportunity to buy, analysts at Wall Street firms now expect institutional investors to ramp up their equities exposures too.
In early April, amid tariff turmoil, Gross had urged dip-buyers to stay on the sidelines, saying that investors should steer away from trying to “catch a falling knife.” At the time, he said that Trump wouldn’t be backing down from his punishing tariffs stance.
Still, he couched his current forecast by adding that his view was “nothing dramatic either way for now.”
(Credit: Bloomberg)
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