A future of interest rates near zero means slower but steadier growth, according to Pimco head Bill Gross.
Separately, Gross brushed aside criticism of discontent at his firm that arose around the departure of top deputy Mohamed El-Erian.
"This company is thriving in 2014," Gross said. He also called Pimco a "happy kingdom" and said the press had mischaracterized the situation.
Gross, founder and CIO of Newport Beach, California-based bond manager Pimco, said the new environment would be a "new neutral," a riff off Pimco's post-financial crisis economic prognostication of "new normal" low growth.
"We expect [markets] to be relatively stable—not that there won't be ups and downs and 10 percent corrections and those types of things—but if the Fed and other central banks stay low and the differential is closer to zero than 2, then we've got a market to at least take some measured risk and earn a decent return," Gross said Thursday at the Morningstar Investment Conference in Chicago.
Gross said he expects 3 percent to 4 percent returns in the bond market and 4 percent to 5 percent gains in stocks.
Gross' speech reflected Pimco's recently published view on the implications of low rates.
"If the future resembles those neutral policy rates, then the investment implications are striking: low returns yet less downside risk than investors currently expect; an end to bull markets as we've known them, but no perceptible growling from the bears," Gross wrote in May. "The reason is that New Neutral global policy rates lower than currently priced into asset markets allow for a margin of safety that reduces downside risk and minimize bubbles."
A more traditional 2 percent real rate, Gross said, would be "far too high in a levered economy." He said that such a rate would mean that the U.S. markets would be tempting another 2008-style financial crisis.
Bond-focused Pimco managed $1.94 trillion in assets as of March 31. The firm's flagship Pimco Total Return Fund (Class A) is up 2.78 percent through June 18. The fund lost 2.30 percent in 2013—causing tens of billions of dollars in outflows that have persisted through 2014—but has produced annualized returns of 5.89 percent over the last 10 years.
—By CNBC's Lawrence Delevingne