Bill Gross gets defensive: 'There is little money to be made almost anywhere in the world'

Published Mon, Sep 14 20201:50 PM EDT

Veteran investor and Pimco founder Bill Gross is encouraging investors to get defensive as prospects for more stimulus fade and growth falters due to the coronavirus pandemic. In his latest letter to investors, the one-time "Bond King" outlines his strategy ahead after months of U.S. outperformance compared to other parts of the world. Gross discusses the role that tumbling bond yields and fiscal and monetary support have played. "There is little money to be made almost anywhere in the world – Covid 19 vaccine or no," said Gross, who ran the largest bond fund in the world at Pimco and went on to helm an unconstrained fund at Janus Capital Group before stepping down in 2019 . He has since focused on managing his own funds and philanthropic endeavors. His latest investing advice is to play banks, tobacco companies and foreign stocks. Viewing the market developments over the past few months, he credits much of the rise in U.S. stocks to interest rates that have fallen much farther than those in countries such as Germany. He also noted the outsized role at stimulus from Congress and the Federal Reserve has played. As the pandemic accelerated in March, Congress passed the CARES Act that authorized more than $2 trillion spending, primarily to support individuals and workers who had been displaced due to the virus-induced economic lockdown . On the monetary side, the Fed slashed short-term borrowing rates to near zero and implemented a slew of lending and liquidity programs to keep markets functioning and provide capital to business. However, Gross, said the likelihood of getting more policy help is low. "My opinion is that much – if not all of the U.S. fiscal stimulus is over," he wrote. "To continue to pump the economy in future years would require not just a 4 trillion dollar deficit but a 5 or 6 trillion dollar one." There's not enough potential growth to offset so much red ink, Gross said, Consequently, he's advising investors to change their focus and adjust to a world where returns are going to slow. Gross has been pessimistic for much of the post-financial crisis period, previously advising that neither stocks nor bonds would provide much return . "An investor, not day trading on Robinhood, therefore should begin to play defense via heretofore shunned sectors such as tobacco, banks and even – yes, foreign companies listed on European bourses that have not skyrocketed on dreams of back-to-normal economic prosperity followed by even lower artificial real interest rates," he wrote.

Bill Gross, Portfolio Manager, Janus Capital Group

Lucy Nicholson | Reuters

Veteran investor and Pimco founder Bill Gross is encouraging investors to get defensive as prospects for more stimulus fade and growth falters due to the coronavirus pandemic.

In his latest letter to investors, the one-time "Bond King" outlines his strategy ahead after months of U.S. outperformance compared to other parts of the world. Gross discusses the role that tumbling bond yields and fiscal and monetary support have played.