Salient to Investors:
Pimco’s Bill Gross said:
- Investors face an age of inflation, a headwind for both stocks and bonds. The cult of equity was dying, and long-term equity returns of 6.6 percent above inflation – the Siegel Constant – won’t be seen again. Institutional investors will find the highest returns in countries with faster growth rates as nations such as the U.S. offer risk in the long term.
- Private credit-market debt is too high and the age of credit expansion that led to double-digit returns is over. The credit-based financial system has excessive fat and interest rates are too low. Regulator capital risk standards for banks and investors’ fear of losing money has prevented central banks’ endless stream of liquidity and zero bound interest rates from sparking the economic recovery.