Investment professor Bill Gross has a bit of a view on the stock market and the bulls are not going to like it.
The legendary bond fund manager, once admirably referred to on Wall Street as the ‘Bond King’, has not been laser-focused on the market since retiring from Janus Henderson in 2019 – until recently.
But recent market movements have apparently forced Gross to deliver his monthly market outlook, not to mention the conclusion of his legal dispute with his neighbor, which includes the explosion of the theme song “Gilligan’s Island”.
“But away from Gilligan, the Skipper and the SS Minnow and from more important issues like ‘Wonder Woman 1984’ (100% green tomatoes – don’t think about looking) and maybe the Bubblicious stock market,” Gross writes.
‘Why is it that stocks are so high and IPOs like DoorDash DASH,
rose 80 percent on its first day of issue and Airbnb ABNB,
… Robinhood and momentum rule, ”he concludes.
“This market is driven – yes – by intense speculation, but also by fiscally pumped, central bank-important corporate earnings, which are discounted at nominal and in many cases negative real interest rates to present value, but deliver record prices,” Gross wrote. with reference to rates that are around 0% and 0.25%, and real yields, which yield bonds, which make up inflation, trade in areas below zero.
This means investors earn very little on savings or are actually willing to lose money for the supposed security of holding government bonds that are adjustable for inflation.
In that world, investors are driven to riskier areas of the market, Gross says.
“My point, however, is that the decline of the 200 basis point in real 10-year treasury yields since January 2019 has played a significant role in the 50% rise in the S&P 500 during the same period,” Gross wrote, with reference to the ten-year treasury. note yield TMUBMUSD10Y,
which is less than 1% compared to the total return for the S&P 500 SPX index,
at 1.6%, FactSet data shows.
The 76-year-old investment professor points to the Federal Reserve’s asset buying programs and other stimulus measures that offer an extraordinary setback in the financial markets, as well as the fiscal relief packages from Washington, as part of the infrastructure for investors’ evil in the face of what he experiences as inflated values.
He also suggests that the market and economy may become too accustomed to government injections.
He writes:
‘And how many fiscal packages can the stock market endure before realizing that GDP is now opioid, dependent on more and more dollars from Washington turning our Republican capitalist scheme into a snag! ” ‘Universal revenue-like’ sluggo similar to Europe? ‘
For now, Gross appears to be attributing the bulk of recent gains to the Dow Jones Industrial Average DJIA,
the S&P 500 Index and the growing companies in the Nasdaq Composite Index COMP,
including Tesla TSLA,
to uberlow and negative interest rates in force.
However, it is not clear how long the market measure will last in 2021, says Gross.
His January report comes after Gross and his partner, Amy Schwartz, were ordered by Supreme Court Judge Kimberly Knill not to violate the Laguna Beach Municipal Code’s sounding rules or play music on their outdoor speakers and instructed them to do so. to stay at least 16 feet. away from their neighbor by the sea.
The ruling stems from Gross’s neighbor, Mark Towfiq, who claims he has a “targeted campaign of harassment” after complaining about a large glass statue he said was erected without permits. Gross also played the theme for the sitcom Gilligan’s Island and other loud music, repeatedly in retaliation for Towfiq’s complaint, according to court documents.