Just from his legal feud with his neighbor, investment professional Bill Gross has some views on the stock market and bulls won’t like it.
The legendary bond fund manager, once admired on Wall Street as the “ Bond King, ” has – until recently – not laser-focused on market movements since retiring from Janus Henderson in 2019.
But recent moves in the markets have apparently forced Gross to reflect his monthly market outlook, not to mention the conclusion of his legal dispute with his neighbor, including his detonation of the theme song “Gilligan’s Island.”
“But away from Gilligan, the Skipper and the SS Minnow and on to more important things like ‘Wonder Woman 1984’ reviews (100% green tomatoes – don’t think to look) and maybe the Bubblicious stock market, ‘writes Gross.
So why are the stocks so high and IPOs like DoorDash DASH,
rose 80 percent on the first day of issue and Airbnb ABNB,
… Robinhood and momentum rule, ”he concludes.
“This market is driven – yes – by intense speculation, but also by fiscal-pumped, central bank-stimulated corporate profits, which, when discounted to present value at near zero nominal and in many cases negative real interest rates, yield record prices, Gross wrote, referring to rates that are around 0% and 0.25% and the real yields, bond yields that explain inflation, are traded in sub-zero areas.
That means investors are making very little on savings or even willing to lose money because of the alleged safety of holding government bonds that have been adjusted for inflation.
In that world, investors are being pushed to riskier parts of the market, Gross notes.
“My point, however, is that the 200 basis point drop in real interest rates on 10-year Treasury bonds since January 2019 has played a significant role in the 50% price increase of the S&P 500 over the same period,” Gross wrote, referring to the 10 -year treasury. note proceeds TMUBMUSD10Y,
which is less than 1%, compared to the total return for the S&P 500 index SPX,
at 1.6% show FactSet data.
The 76-year-old investment professional points to the Federal Reserve’s buying programs and other stimulus measures that provide an extraordinary backstop in the financial markets, as well as Washington’s tax relief packages, as part of the underpinning of investor exuberance in the face of what he sees as inflated values.
He also suggests that the market and the economy get used to government injections.
He is writing:
And how many tax packages the stock market can bear before realizing GDP is now opioid-ish, depending on more and more Washington dollars turning our Republican capitalist supply side into a – gasp! – ‘universal income-ish’ sluggo comparable to Europe? ‘
For now, Gross appears to be attributing the lion’s share of recent gains for the Dow Jones Industrial Average DJIA,
the S&P 500 index and the growing companies in the Nasdaq Composite Index COMP,
including Tesla TSLA,
against uberlow and negative interest rates in effect.
However, it’s not clear how long the beat will last for markets in 2021, Gross says.
His report for January comes after Gross and his partner, Amy Schwartz, were ordered by Supreme Court Justice Kimberly Knill not to violate the sound regulations of the Laguna Beach Municipal Code or play music on their outdoor speakers and instruct them to at least Stay 5 meters. away from their coastal neighbor.
The verdict came from Gross’s neighbor Mark Towfiq, who accused of a “targeted campaign of harassment” after complaining about a large glass statue he said was erected without permits. Gross also played the theme of the sitcom Gilligan’s Island, and other loud music, repeatedly in retaliation for Towfiq’s complaint, court documents show.