In his latest investment outlook, the investment guru noted that structural headwinds such as ongoing deleveraging, slowing global growth and shifting demographics are likely to hold back economic expansion in the developed world.
Gross – who runs the world’s largest mutual fund, the $280bn Pimco Total Return Fund – expects much of the developed world to experience economic growth of just 2% or lower for the foreseeable future.
Pimco, he added, believes long-dated government bonds in core economies such as the US, the UK and Germany, high-yield bonds and stocks of banks and insurers are likely to suffer in this environment.
Gross said: “[It is getting] harder to maintain the economic growth that investors have become accustomed to. The new normal … will ‘take you down’ and lower your expectation of future asset returns. It may not last forever but it will be with us for a long, long time.”
In his outlook, the manager argued that commodities such as oil and gold, US inflation-protected bonds, high-quality municipal bonds and non-dollar emerging market equities are likely to fare well in a repressed-growth world.
“The list to a considerable extent reflects the view that emerging economy growth will continue to be higher than that of developed countries,” he explained.
