Even ‘Bond King’ Bill Gross warns ‘don’t own bonds’ as long-term debt enters a new ear of volatility
Source: Fortune ·
"Be prepared for the end of 'what you are used to' stock markets and higher volatility in prices for the benchmark 10-year Treasury bonds."
From the source
PIMCO cofounder Bill Gross, who revolutionized bond investing with active trading strategies, warned the overall credit landscape has become unbalanced and cautioned against holding longer-term debt. In a Financial Times op-ed on Wednesday, he pointed out that government, mortgage and corporate credit now totals about $84 trillion. “Too much debt can lead to too much risk and too much equity can lead to less earnings per share growth under certain underperforming productivity cycles,” Gross wrote. “Move them both at the same pace consistent with industry standards and economic growth more than likely expands as well.” But balance sheets have grown too lopsided, putting growth at risk, he said. The AI sector’s debt boom is an anomaly by historical standards, and federal debt has already hit peak levels for peacetime, now at 100% of GDP. While all that debt is fueling growth now, it has led to higher inflation today and will likely slow growth in the future, Gross added. “In such an…