Gross Says Central Banks Running Out of Time

Bond manager Bill Gross, who runs the Janus Global Unconstrained Bond Fund, said central banks are “running out of time” to reflate global economies as their aggressive policies including quantitative easing and low, even negative, interest rates are losing their effectiveness.

In his April Investment Outlook, Gross wrote that markets and the capitalistic business models based upon them and priced for them “will begin to go south” if global economies do not produce growth.

Given massive monetary stimulus, Gross said nominal gross domestic product growth rates for the U.S. should be between 4 percent and 5 percent by 2017 while that for the euro zone should be between 2 percent and 3 percent, respectively.

On Monday, the Federal Reserve Bank of Atlanta’s GDPNow model predicted U.S. growth at a 0.6 percent pace in the first quarter, marked down from an earlier estimate of 1.4 percent.

In Japan, nominal GDP should be between 1 percent and 2 percent while China should be between 5 percent and 6 percent by 2017, Gross added.

“Capital gains and the expectations for future gains will become Giant Pandas – very rare and sort of inefficient at reproduction,” Gross said. “I’m saying that developed and emerging economies are flying at stall speed and they’ve got to bump up nominal GDP growth rates or else. Cross your fingers.”

Gross warned against investing in negative-yielding securities.

via Reuters

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, he established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza