PIMCO’s Bill Gross Makes Predictions for 2013
Bill Gross, co-founder of PIMCO and a long-time observer of the markets, said his prediction of less than a five percent return on bonds was not hard given they yield 1.7%.
Gross said his forecast for stocks depends on two primary things: real economic growth which he sees at two percent or less, and the Fed. Gross commented that Ben Bernanke isn’t “Rumpelstiltskin” and can only turn straw into gold for so long.
Gross said profits have benefited from low interest expense and very weak wage growth and at some point those tailwinds would end.
Gross expects global GDP growth of four percent as opposed to the expected 5-6 percent. Gross sees the economy as continuing to deleverage with the central banks ineffectively fighting it.
Gross commented on several positives including rising housing prices, lower energy costs, Chinese stimulation efforts, and easier money. However, expecting 10% equity returns with 2-3% economic growth is like spinning straw into gold and can only continue for so long, Gross explained. A 5% return from stocks and a 3% return from bonds is something we should expect going forward, he added.
Regarding gold and commodities, Gross said he sees them moving higher. He said gold is a function of real interest rates, and if rates move lower gold can catch a bid. However, expectations of 10-20% returns for the metal are too high, Gross added.
Back in October, Gross said he believed in high quality dividend paying stocks for the long term [link].