Investing legend Bill Gross says there is ‘little money to be made’ in the world as stimulus wanes and lists 3 sectors investors should buy to play defense

Billionaire investor Bill Gross listens during the Milken Institute Global Conference in Beverly Hills, California, U.S., May 3, 2017. REUTERS/Lucy Nicholson/File Photo
  • Investing legend Bill Gross said there is “little money to be made almost anywhere in the world” in his most recent investment outlook note. 
  • The famed bond and fixed-income investor said that much, if not all of the US fiscal stimulus is over. 
  • Investors should play defense by looking to “shunned sectors” like tobacco, banks, and certain European stocks.
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“There is little money to be made almost anywhere in the world – Covid 19 vaccine or no.”

That’s according to legendary bond and fixed-income investor Bill Gross, in his latest investment outlook note titled “Tattooed,” in which he compared the coronavirus’ effects on the economy to a tattoo. 

The billionaire investor and co-founder of PIMCO said that the US fiscal stimulus, which put money into workers’ pockets and propped up US stock indices higher than global stocks, is waning.

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Gross said investors will need to play defense going forward by looking to “shunned sectors” like tobacco and banks. They can even consider “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 added.

He said that the US fiscal stimulus was larger than that of most European countries, and this, along with the real rate rally, could explain why US indices like the Nasdaq and S&P 500 are up 5% to 25%, while global equity indices like the FTSE, DAX, and CAC 40 are down an average of 5% to 15%. 

But now much, if not all of the US stimulus is over, said Gross, and the nation would need even more money than it required previously to continue to bolster the economy. 

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“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,” the investor wrote. “And to reduce the deficit to 3 or 2 trillion would actually be known in economist speak as ‘fiscal drag’ and would have to be made up by at least 6% to 7% real annual growth for years and years in the private sector – a Trumpian or a Bidenian dream I suppose but not realistic.” 

Real interest rates would also have to move continually lower in this scenario, with 5-year TIPS potentially moving to -230 bps, which Gross said would require “quantitative easing of unacceptable proportions.”

He concluded: “Our global economy’s tattoo cannot be easily removed for years to come.”

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