Please ensure Javascript is enabled for purposes of website accessibility

Why Bond Guru Bill Gross Thinks Investors Should Be Careful

By Dan Caplinger – Feb 8, 2014 at 3:05PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The PIMCO leader believes that stocks could be in for a rough ride. Find out why here.

The Dow Jones Industrials (^DJI 2.18%) have gotten out to a terrible start in 2014, dealing investors a tough blow after five straight years of solid gains. But bond legend Bill Gross believes that investors still need to be cautious even after recent declines, pointing to changing macroeconomic conditions as potentially putting more pressure on risky assets like stocks.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, goes through Gross's argument, in which he explains that slowing credit expansion could hit asset prices. Basically, Gross believes that falling government deficits and slowing quantitative easing will halt the growth of credit in the economy, and historically, that has led to pressure on risk assets. By contrast, Gross believes that the high-quality bonds in his PIMCO Total Return ETF (BOND 0.51%) could outperform in such an environment, and Dan adds that other non-PIMCO ETFs like the iShares 20+ Year Treasury ETF (TLT 0.73%) could also do well. Dan concludes that you have to take Gross's advice with a grain of salt given PIMCO's bond emphasis, but it's still worth being careful with your investments.

Dan Caplinger and The Motley Fool have no position in any of the stocks mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Nearly 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$34,589.77 (2.18%) $737.24
PIMCO Total Return Exchange-Traded Fund Stock Quote
PIMCO Total Return Exchange-Traded Fund
BOND
$91.22 (0.51%) $0.46
iShares Barclays 20+ Year Treasury Bond Fund Stock Quote
iShares Barclays 20+ Year Treasury Bond Fund
TLT
$102.73 (0.73%) $0.75

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
349%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.