Gross also expressed concern over short-dated Treasuries offering higher returns than longer-term ones, stating that a finance-based economy cannot thrive under such conditions. He predicted a slowdown in the economy following the use of significant fiscal stimulus in recent years. He also warned that regional banks could face more trouble following the Silicon Valley Bank incident earlier this year, where lenders' bond portfolios slumped in value after the Fed hiked rates.
Key takeaways:
- Bill Gross, known as the 'Bond King', has warned that stocks and long-dated bonds are overpriced and the US economy will slump.
- Gross believes that the market is overvalued due to low equity risk premium and high PE ratios.
- He also warned of the potential impact of the Federal Reserve's interest rate hikes, which he believes have not yet been fully felt in the economy.
- Gross also predicted that regional banks could face more trouble following the Silicon Valley Bank fiasco earlier this year, particularly if they have not reduced their duration risk.