Then he got to his feet. Its preferred market segment: natural gas pipelines, whose yields are estimated to be between 9% and 12% for investment quality stocks with certain tax advantages. He also suggests investors take a look Magellan Midstream Partners (MMP), BP Midstream partners (BPMP) and Product partners for enterprises (EPD).
Growth stocks, especially the biggest IPOs of 2020, including Snowflake, Airbnb and Doordash, will struggle to live up to expectations of what Gross calls “day trading robinhoods,” he added. . The same goes for SPACs or special procurement companies and “Tesla 2020”.
“This market is driven – yes – by intense speculation, but also by corporate earnings received by central banks, fiscally pumped, which, when reduced to their current value by almost zero nominal rates and, in many cases, real negative interest rates , produce record share prices, “Gross said.
He attributes their potential for declining performance to the Federal Reserve’s commitment to keeping interest rates at almost zero for years.
“Much of the market’s appreciation over the past two years, especially for rising stocks, has been due to lower real interest rates,” Gross said. A rally that will only continue if real returns remain “substantially negative,” he continued.
On a broader note, the investment legend warned of the scar impact of the coronavirus on the economy – along with a stock market pumped with Fed assistance and fiscal incentives – could begin to reflect stock markets in the Nordic and European countries. It is a cause for concern for Gross, who notes that both markets in these countries trade at a lower price-to-earnings ratio than some of the newest IPOs and stocks such as Microsoft currently trading on Wall Street.
“How many fiscal packages can the stock market withstand before it realizes that GDP is now like opioids, depending on more and more dollars from Washington, which turns our supply capitalist Republican behemoth into a – gasp! – “universal income” To avoid this, it seems to me, requires unemployment to return to pre-emptive levels. Fed Chairman Jerome Powell said just as much – but we are far, far away from him, “Gross said.
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