Bond veteran Bill Gross has warned that stocks and other assets are priced at unrealistic levels based on the actual outlook for global growth.
‘Equity markets are priced for too much hope, high yield bond markets for too much growth, and all asset prices elevated to artificial levels that only a model driven, historically biased investor would believe could lead to returns resembling the past six years, or the decades predating Lehman,’ the manager of the Janus Global Unconstrained Bond fund said.
‘High rates of growth, and the productivity that drives it, are likely distant memories from a bygone era.’
In his note Gross points to the fact that growth depends on productivity, which has remained at around 0.5% over the last five years from the pre-financial crisis norm of more than 2%.
He also cited an International Monetary Fund report that says growth is still impaired by slow business investment and an aging population with reduced demand for consumption.
Gross suggests that the IMF report signals a global productivity slowdown and that it’s not ‘just a US-based phenomena’.