Bill Gross Says Central Banks are Making Conventional Asset Classes too Risky

Bill Gross’ latest advice to investors is not comforting, with the fixed income guru down on all the conventional choices.

“I don’t like bonds; I don’t like most stocks; I don’t like private equity,” the Janus Capital bond guru said Wednesday in his latest letter to investors.

The reason Gross is so down on the two conventional asset classes is that central banks have created an atmosphere where economic growth and the high-yielding returns that should accompany it are difficult to find.

There’s “too much risk for too little return” for banks to lend in the current climate, while the low-interest climate helps asset prices but crimps savings and business investment.

“Banks, insurance companies, pension funds and Mom and Pop on Main Street are stripped of their ability to pay for future debts and retirement benefits,” Gross wrote. “Central banks seem oblivious to this dark side of low interest rates. If maintained for too long, the real economy itself is affected as expected income fails to materialize and investment spending stagnates.”

His dour outlook comes as central banks around the world continue to provide stimulus and keep rates anchored well below normal levels. In the U.S., the Federal Reserve has kept its key rate in the 0.25 percent to 0.5 percent rage, even though Fed officials had indicated last December that rates were likely to rise four times this year.

via CNBC

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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, Alfonso Esparza 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 has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. 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