Influential money manager Bill Gross says good times over

Bill Gross, the former manager of the world’s largest bond fund, said prices for many assets will fall this year as record-low interest rates fail to restore sufficient economic growth.

With global expansion still sputtering after years of interest rates near zero, investors will gradually seek alternatives to risky assets, Gross wrote Tuesday in an investment outlook for Janus Capital Group Inc., where he runs the $1.2 billion Janus Global Unconstrained Bond Fund.

“When the year is done, there will be minus signs in front of returns for many asset classes,” Gross wrote in the outlook. “The good times are over.”

Six years after the end of the financial crisis, borrowing costs in the world’s richest nations are stuck near zero, a sign investors have little confidence that their economies will strengthen. Gross, the former chief investment officer of Pacific Investment Management Co. who left that firm in September to join Janus, has argued the Federal Reserve won’t raise interest rates until late this year if at all as falling oil prices and a stronger U.S. dollar limit the central bank’s room to increase borrowing costs.

While timing the end of a bull market is difficult, the next 12 months will probably see a turning point, Gross wrote.

“Knowing when the ‘crowd’ has had enough is an often frustrating task, and it behooves an individual with a reputation at stake to stand clear,” he wrote. “As you know, however, moving out of the way has never been my style.”

Gross’s prediction may be well timed. Even as the U.S. economy expanded at a 5 percent annualized pace, the fastest since the three months ended in September 2003, tumbling oil prices and concerns Greece will exit the euro have sent American equities to the biggest decline to start a year since 2008, data compiled by Bloomberg show.

The Standard & Poor’s 500 Index finished up 11 percent in 2014 and was up 30 percent the prior year.

Gross, who earned his reputation by building Pimco into a $2 trillion money manager with some of the industry’s highest returns, has in recent years stumbled in the bond market, with his former flagship fund trailing a majority of competitors three out of the past four years.

Gross said Tuesday in his commentary that investors should hold high-quality assets with stable cash flows, such as Treasuries, high-quality corporate bonds, and stocks of companies with little debt and attractive dividends.

“With moments of liquidity having already been experienced in recent months, 2015 may see a continuing round of musical chairs as riskier asset categories become less and less desirable,” Gross wrote.

This story was originally published January 6, 2015 at 12:15 PM with the headline "Influential money manager Bill Gross says good times over."