In a world of uncertainty, PIMCO founder and Janus Capital Portfolio Manager Bill Gross is confident investors can grow their portfolios by being conservative.
“I don’t especially think that stocks are going to go up 10% over the next 12 months, and so stick to those safe arbitrage, those closed-end funds that yield 6 to 7 to 8%. Those are in my own personal portfolio and you know it’s been looking good for the past 12 months,” he said during an interview with the FOX Business Network’s Maria Bartiromo.
Meanwhile, the VIX, which gauges the amount of volatility fears in the market, is up 22%. As for his thoughts on the rest of 2016, Gross believes the index will stay around this level for the most part.
“That’s about twice as much volatility as what we’ve had in prior years. So does that mean one to one and a half percent moves on a daily basis? Almost, because the market is uncertain in terms of the economy, uncertain in terms of the negative interest rates, [and there’s] uncertainness as to whether the negative interest rates will do any good.”
Although the U.S. economy is expected to grow over 2% in the first quarter, Gross says the U.S. needs to produce a GDP of three to four percent. “You need four percent nominal GDP to grow profits and that hasn’t been taking place. I don’t see a recession, but I think critically we should be looking for nominal GDP at two percent which to me would be a nominal GDP recession.”
Gross also weighed in on uncertainty at the Fed.
“It centers around global economic conditions as opposed to domestic. I think the Fed is well-versed and very happy in terms of consumption and a 2% GDP [growth] number for the U.S., but I think they observe problems in China, they observe problems in emerging markets and think eventually that those problems might come back to the United States and so they are cautious. They probably won’t move in March and they may not move for the rest of the year depending upon those conditions.”