Then he came upon copper branches. Its favorite market sector: natural gas pipelines, the returns of which are estimated to be between 9% and 12% for investment grade equities with certain tax benefits. This is also why he suggests that investors look into it. Magellan Midstream Partners (MMP), BP Midstream Partners (BPMP) and Business Product Partners (EPD).
Growth stocks, particularly the biggest IPOs in 2020, including Snowflake, Airbnb and Doordash, will struggle to meet expectations of what Gross calls ‘day trading Robinhoods,’ “he added. The same goes for SPACs or special procurement companies and the ‘Teslas of 2020’.
‘This market is driven – yes – by intense speculation, but also by fiscally pumped centralized corporate earnings, which are discounted as nominal and in many cases negative real interest rates to current value, yielding record prices. , “Gross said.
He attributes their potential lower performance to the Federal Reserve’s commitment to keep interest rates at near zero for years.
“Much of the market’s appreciation over the past two years, especially for growth stocks, is due to lower real interest rates,” Gross said. A rally that will only continue if the actual returns are “substantially negative”, he continued.
On a broader note, the investment legend warned that the scars the coronavirus has on the economy, coupled with a stock market pumped by the Fed and the fiscal stimulus, could begin to reflect the stock markets in Northern and European countries. This is of concern to Gross, who mentions that both of these countries’ markets are trading at a lower price-to-earnings ratio than some of the latest IPOs and stocks such as Microsoft are currently trading on Wall Street.
‘How many fiscal packages can the stock market endure before realizing that GDP is now opioid, depending on more and more dollars from Washington that our Republican capitalist offer to a – snag! – ‘universal income- change? like ‘sluggo similar to Europe? To avoid this, it seems to me, that unemployment should return to pre-covid levels. “Jerome Powell, chairman of the Fed, has said so much – but we are far, far away,” Gross said.
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