Pimco’s Gross Sees Less Return, Stubborn Unemployment

Pacific Investment Management Co.’s Bill Gross, manager of the world’s biggest bond fund, said he expects stocks and bonds to return less than 5 percent in 2013 amid a sluggish economy as the effect of Federal Reserve stimulus diminishes.

Gross’s comments, made in a special report on Bloomberg Television, reaffirmed his December investment outlook that “structural headwinds” may lower real economic growth below 2 percent in the U.S. and other developed nations. The Standard & Poor’s 500 (SPX) Index gained 16 percent this year as the Fed stoked risk appetite by buying U.S. bonds in a strategy called quantitative easing. The Bank of America Merrill Lynch U.S. Corporate and Government Index gained 5.2 percent.

9:14

Dec. 31 (Bloomberg) -- Bill Gross, co-chief investment officer at Pacific Investment Management Co., talks about the outlook for stock and bond markets, and the U.S. economy in 2013. Gross also discusses fiscal negotiations among U.S. lawmakers aimed at averting $600 billion in automatic tax increases and spending cuts set to start at midnight. He speaks with Erik Schatzker on the Bloomberg Television special "America's Fiscal Debate." (Source: Bloomberg)

“Ben Bernanke is not Rumpelstiltskin -- he can only spin straw into gold for so long,” Newport Beach, California-based Gross said of the Fed chairman in an interview on “America’s Fiscal Debate” with Erik Schatzker. “QE is having an impact, but the impact is fading,” Gross said.

With globalization, technological and demographic changes restricting growth, investors should seek returns from commodities such as oil and gold, U.S. inflation-protected bonds, high-quality municipal debt and non-dollar emerging market stocks, Gross wrote in this month’s investment outlookarticle on Dec. 4, reiterating earlier recommendations.

The firm’s Total Return Fund (PTTRX) has gained 10.4 percent this year, beating 95 percent of its peers, according to data compiled by Bloomberg. Pimco, a unit of the Munich-based insurer Allianz SE, managed $1.92 trillion as of Sept. 30.