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

FILE PHOTO: Billionaire investor Bill Gross listens during the Milken Institute Global Conference in Beverly HillsLucy Nicholson/Reuters
  • The investing legend Bill Gross said in his most recent investment-outlook note that there was "little money to be made almost anywhere in the world."
  • The famed bond and fixed-income investor said that much if not all of the US's fiscal stimulus is over.
  • Investors should play defense by looking to "shunned sectors" like tobacco, banks, and certain European stocks, he said.
  • Visit Business Insider's homepage for more stories.

"There is little money to be made almost anywhere in the world — Covid 19 vaccine or no."

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

The billionaire investor and Pimco cofounder said that the US's fiscal stimulus, which put money into workers' pockets and led US stock indexes higher than global stocks, was waning.Advertisement

Read more: 'The psychology is even more dangerous than 20 years ago': A Wall Street investment chief says stock valuations are giving him dot-com bubble flashbacks — and warns of a major meltdown in the next year

Gross said investors would need to play defense 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's fiscal stimulus was larger than that of most European countries and that this along with the real rate rally could explain why US indexes like the Nasdaq and the S&P 500 were up by 5% to 25% while global equity indexes like the FTSE, the DAX, and the CAC 40 were down by an average of 5% to 15%.
Advertisement

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

Read more: Buy these 17 'superstar' stocks poised to soar as they use AI technology to drive market-beating growth, UBS says "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."Advertisement

Real interest rates would also have to continually move lower in this scenario, with five-year Treasury inflation-protected securities moving to minus 230 basis points, which Gross said would require "quantitative easing of unacceptable proportions."

He concluded that "our global economy's tattoo cannot easily be removed for years to come."

Read more: Anthony Angotti quit his traditional 9-to-5 career to pursue real-estate investing full time. Here's the strategy he's used to balloon his portfolio to 89 units after an initial duplex investment.Advertisement

{{}}