Bill Gross: Investment Markets in 'New Neutral'

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May 14 (Bloomberg) -- Pimco Founder and Chief Investment Officer Bill Gross discusses the U.S. economy on Bloomberg Television's "Market Makers." (Source: Bloomberg)


In terms of investment markets, we have a new neutral.

The new neutral basically refers to the neutral policy rate going forward, that magical number, whatever it is, whatever janet yellen and mr.

Kearney and others decide it should be to maintain two percent inflation and two percent or three percent real growth.

The new neutral is a magical number that will drive markets going forward.

What that says to me is that this notion that the economy is inching its way back toward some self-sustaining momentum is far too optimistic.

I think so.

We are tapering.

Qe will end.

To the extent of that stimulation that is provided a trillion dollars worth a year of purchasing power going away, perhaps the economy is better off than it was before.

Going forward, it's the policy rate, 25 basis points currently.

It's the price of money on the short end that will ultimately determine the strength of the economy and potential for inflation going forward.

Fed officials have been talking about this for months.

You see it in their blue dots in which they look at the normal fed funds rate.

They all think it's close to four percent.

That's why we think the new neutral policy rate is not four percent, it's about two percent.

It depends significantly on further stimulation from central banks, because we have high levels of debt that must be supported with low interest rates.

It's not necessarily a positive.

It is the reality we see going forward over the next three or four years, and has important implications for stocks and list assets.

What does do well in the new neutral?

This text has been automatically generated. It may not be 100% accurate.


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