Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Support MFO
Donate through PayPal
Bill Gross's Investment Outlook For July 2014: One Big Idea
Some may, and will, argue. But my take is that all of this New Neutral is a re-constituted version of a lot of PIMCO's New Normal from a few years ago. Back then, the view from PIMCO was that stocks would return fairly low single digits, which is what this pseudo-new view suggests. And bonds will do slightly less than stocks, with less volatility, which just happens to play into PIMCO's hands as the world bond gurus. I do not necessarily disagree with the premise, nor the reasoning behind it. But I suspect that, just as New Normal had umpteen revisions and editions, New Neutral will evolve, too. Then again, PIMCO's leader may change the company's outlook and come up with a NEW 'new' next year. So nothing really new here. We have all been wondering what will happen when the Fed takes away the punch bowl. The scenarios have been all over the place. Mr. Gross' take is pretty benign, but it assumes the Fed follows his newest NEW economic analysis.
Other well-respected folks think the Fed has already waited too long and will be forced to raise rates much faster than anticipated, perhaps as much as 50-100 bps at a time. Now THAT would certainly step on Mr. Gross' tail! Since my economic crystal ball is in the shop, and since I am not prescient enough to be able to foretell the future, my take is to remain nimble, flexible, and to not be greedy, either with bond yields or with stock allocations. Most of our clients are more fearful of losing principal than they are of missing out on more stock market gains. There are always a few who want to join the part when the majority of people have started to exit, but that is just the nature of personalities. Is the party over? Probably not, but it seems unlikely the good times can last long, once the Fed removes the punch bowl.
I remain ever watchful as to what is going to "force the Fed to raise rates". The economy(s) remains stuck between a rock and a hard place. The ongoing "low interest rate environment" is going to be a most difficult investment punchbowl to remove from the party table without folks becoming pissed; and I am very sure that the world's central bankers are fully aware of the circumstances and possible outcomes. One must keep in mind that the central banker folks are also in the business of "marketing" an idea, no less than the big houses at Wall St., the local retailer or a religious faction. They (the above listed, et al) must continue to plant a thought seed in order to hope for a crop to harvest, regardless of the target client. Business is business, be it a mind set or monetary; as a primary target.
Comments
Other well-respected folks think the Fed has already waited too long and will be forced to raise rates much faster than anticipated, perhaps as much as 50-100 bps at a time. Now THAT would certainly step on Mr. Gross' tail! Since my economic crystal ball is in the shop, and since I am not prescient enough to be able to foretell the future, my take is to remain nimble, flexible, and to not be greedy, either with bond yields or with stock allocations. Most of our clients are more fearful of losing principal than they are of missing out on more stock market gains. There are always a few who want to join the part when the majority of people have started to exit, but that is just the nature of personalities. Is the party over? Probably not, but it seems unlikely the good times can last long, once the Fed removes the punch bowl.
I agree with BobC, this is just a new name for the same prognosis.
One must keep in mind that the central banker folks are also in the business of "marketing" an idea, no less than the big houses at Wall St., the local retailer or a religious faction.
They (the above listed, et al) must continue to plant a thought seed in order to hope for a crop to harvest, regardless of the target client. Business is business, be it a mind set or monetary; as a primary target.
Catch