Bill Gross: Embrace Stimulus
Earlier today Bill Gross has shared something of great interest.
“For now, investors must go with, indeed embrace this financial methadone QE fix,” Gross wrote in a monthly investment outlook published Monday. “Quantitative easing will continue even though the dose may be reduced in future years. But while a methadone habit is far better than a heroin fix, it has created and will continue to create an unhealthy capitalistic equilibrium that one day must be reckoned with.”
Yields on 10-year U.S. Treasuries are likely to rise gradually but stay artificially low “due to the kindness of foreign central bank quantitative easing policies,” according to Gross.
“I would venture a guess that without QE from the ECB and BOJ that 10-year U.S. Treasuries would rather quickly rise to 3.5 percent and the U.S. economy would sink into recession,” Gross wrote today.
I couldn’t agree more with Mr. Gross. That has been our own analysis for quite some time. In fact, Matt Demeter and I believe that, based on our work, bonds have completed their 30+ year bull market in July of 2016.
With that in mind, I would like to point out something of great importance. Today’s psychological backdrop. If a market legend holds such a view, you can rest assure that most investors follow the same line of thinking.
Mr. Gross believes that the FED has an absolute control and that their QE/liquidity policies will work for the foreseeable future. So much so that investors should embrace it.
And perhaps he is absolutely right.
My only issue is this. When everyone reaches the same conclusion, as is the case here, the market or its fundamental backdrop tend to swing the other way. The only question is …..WHEN?
If you would like to find out exactly what happens next based on our Timing and Mathematical work, please Click Here.