Janus Capital portfolio manager Bill Gross on Tuesday explained how the stock market is overvalued and why investors need to be cautious.
“I think all asset markets, whether it’s low bond yields and high bond prices or high stock prices and high P/E [price-earning] ratios, are all being influenced by artificial money coming from central banks…Central banks at some point in my opinion certainly have to stop buying bonds and renormalize the economy,” he told FOX Business’ Trish Regan.
Gross expounded that the Trump rally won’t last and investors should lower their expectations.
“So if you are expecting double-digit types of returns or even six, seven or eight percent types of returns, I think prices are at a level where we’re more apt to see three or four percent type of returns. So lower expectations and perhaps save more if you need money,” he said.
The legendary bond investor also discussed why productivity will continue to decline.
“I think investors basically, and politicians and citizens on a global basis have to get used to the fact that productivity…is basically much lower than what it was and will continue to be simply because secular forces are keeping a lid on our ability to grow despite fiscal and monetary policies that are very stimulative,” he said.