Bill Gross PIMCO’s long-term outlook, the cult of inflation has begun.
Productivity is not growing (and no solution for that offered by him) and therefore, Stocks and Bonds will both deliver lower performance than they have in the past.
If financial assets no longer work for you at a rate far and above the rate of true wealth creation, then you must work longer for your money; suffer a haircut on your existing holdings and entitlements, or both.
The primary magic potion that policymakers have always applied in such a predicament is to inflate their way out of the corner. The easiest way to produce 7–8% yields for bonds over the next 30 years is to inflate them as quickly as possible to 7–8%!
An investor should continue to expect an attempted inflationary solution in almost all developed economies over the next few years and even decades. Financial repression, QEs of all sorts and sizes, and even negative nominal interest rates now experienced in Switzerland and five other Euroland countries may dominate the timescape. The cult of equity may be dying, but the cult of inflation may only have just begun.
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