Salient to Investors:

Bill Gross at Pimco said:

  • Interest rates are so low and corporate spreads so tight that you have to be leery of prices going the other way.
  • Structural headwinds may reduce real GDP below 2 percent in the US and other developed nations.
  • With globalization, technological and demographic changes restricting growth, investors should investin commodities like oil and gold, US inflation-protected bonds, high-quality municipal debt, and non-dollar emerging market stocks
  • Avoid long maturity developed country bonds in the US, UK and Germany.
  • Avoid high-yield debt and financial stocks of banks and insurance companies.
  • Expect annual returns of 3 percent to 4 percent from bonds at best and equity returns only a few percentage points higher.
  • Shorter-maturity Treasuries look appealing given that the Fed will likely end the sale of 2-yr and 3-yr Treasuries  when its Maturity Extension Program finishes in December and some bank accounts lose government insurance.

Strategists expect some of the money on deposit that will lose government insurance will flow into the US money markets, sending rates possibly as low as below zero on some short-term debt instruments like Treasury bills.

Mohamed El-Erian at Pimco said Fed easing will continue, with more balance sheet operations.

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