Submitted by Taps Coogan on the 17th of November 2017 to The Sounding Line.
Janus Henderson’s Bill Gross recently spoke to CNBC and delivered this warning about US stock valuations:
“The credit cycle is peaking, in my view, which means that central bank support in the form of ultra-low interest rates and extreme amounts of quantitative easing that you just mentioned, it’s becoming less accommodative and I think an important key to asset prices and profits has always been the growth rate in credit, not just in the US but worldwide, including China and even that is slowing down… I am not supporting a bear market but sort of a market where you move into an old age retirement community and the pace of activity and prices act more maturely and so I think the halcyon days are over… not that things are going to go down precipitously but basically a peak. Maybe it’s a permanent plateau. Remember that one in 1929? But in any case, I think the double digit increases are over simply because the credit cycle itself is pulling back. The Fed is raising interest rates. The Fed is reducing its balance sheet. The ECB is going to reduce its balance sheet by half and ultimately raise interest rates and so these are slight negatives that argue against a continued bull market.”
There is more to the interview which can be found below. Just a point of correction, the ECB has announced a plan to reduce its QE program by half, not its balance sheet. The ECB’s balance sheet will continue to grow, but at half the rate.
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