Veteran Bond King Speaks Out: Divergent Outlook for Stocks and Bonds
Bill Gross, known as the "Bond King," recently publicized his market views on social media, warning investors to be wary of long-term risks in the U.S. bond market, while maintaining a relatively optimistic stance on U.S. stocks. As the former chief investment officer of PIMCO (Pacific Investment Management Company), Gross's analyses continue to attract significant market attention.
He explicitly stated that the U.S. bond market faces a "bear market" pressure in the future due to high fiscal deficits and a weakening dollar, while the stock market could gradually enter a "bull market" powered by growth momentum from artificial intelligence.
U.S. Debt Dilemma: Deficits and Weak Dollar Form a Negative Combination
On the bond market front, Gross candidly noted that the current downside for 10-year U.S. Treasury yields is limited. He believes that although yields recently fell briefly to 4.3%, without significant cooling of inflation, they may struggle to fall effectively below 4.25%.
He emphasized that, based on historical experience, 10-year U.S. Treasury yields usually need to be about 1.75 percentage points higher than the Consumer Price Index (CPI). In the current environment, the expansion of fiscal deficits, the depreciation of the dollar, and the growth of bond supply collectively hinder CPI from falling below 2.5%. This implies that the bond market remains in a long-term bear cycle with prices under pressure.
Gross's analysis indicates: "The structural negative factors in the bond market remain strong, lacking a basis for yield declines."
Support for U.S. Stocks: AI as the New Engine of Growth
Conversely, Gross holds a more positive attitude towards U.S. stocks. He believes that despite slowing economic growth and pressure on the bond market, U.S. stocks still have upward potential driven by the wave of artificial intelligence. Especially with continued strength in tech stocks, the overall stock market may display a "bull market" pattern.
He expects the U.S. economy to maintain an annual growth rate of 1%-2% in the future, providing moderate support for the stock market. In fact, since the brief pullback triggered by tariffs in early April, the U.S. stock market has made a significant rebound. The S&P 500 index has risen over 3% this year, almost reaching its historical peak; the tech-heavy Nasdaq 100 index has gained more than 5% year-to-date, setting new closing highs.
Investor Sentiment Warms, Gross Remains Cautious
Notably, during the severe market turmoil caused by tariff policies in early April, Gross warned investors against "catching falling knives" and advised them to stay on the sidelines. He predicted that Trump would not easily abandon his tough tariff stance, and his warning briefly alarmed the market.
Although the U.S. stock market has largely stabilized, Gross still reminds the market to remain cautious. In his latest comments, he stated: "It now seems that no matter the scenario, there won't be much change." This statement reflects that while he is optimistic about the potential brought by AI, he remains cautious about the overall market environment.
Structural Changes and Investment Strategy Diversification
Overall, Gross's views highlight that the current market is undergoing structural changes: technology-driven companies are redefining the stock market trajectory, while the bond market is deeply affected by traditional macro risk factors. For investors, this means more emphasis on diversification strategies in asset allocation, being wary of bond risks while cautiously participating in tech-led stock market growth trends.
In his view, the real challenge lies in: amid increasingly complex macroeconomic fundamentals and intertwined signals, identifying trends and managing risks will be the core of investment decision-making in the foreseeable future.
