Edward Harrison is the founder of the blog Credit Writedowns and is a finance specialist at Global Macro Advisors. Previously, Edward was a strategy and finance executive at Deutsche Bank, Bain, and Yahoo. He started his career as a diplomat and speaks German, Dutch, Swedish, Spanish and French. Edward holds an MBA from Columbia University and a BA in Economics from Dartmouth College.
Bill Gross has released his latest investment outlook for Janus Henderson. And it is bearish for bonds.
Bonds, like men, are in a bear market. For both, it’s hard to say when it all began. There was no Helen Reddy “I Am Woman” moment back in June 2012, and then again in July 2016 when the 10 year Treasury double-bottomed at 1.45%, but then in retrospect it should have been obvious that for bonds, like men – “their time was up”. Eighteen months ago, it was obvious to most observers that the economy, measured by nominal GDP, was not going to go much lower than 3% and that the Fed was having second thoughts about quantitative easing. A 1.45% 10 year was at that time set up for perpetual QE and the possibility of a deflationary collapse in the economy. Neither condition prevailed, and so 1.45% for tens can legitimately be cited as the end of the bond bull market which began at 15.8% in 1981 and provided prescient portfolio managers with the potential for huge capital gains and the moniker of “total return”, which previously had been the sole bastion of stocks and real estate.
Bottom line: Janus Henderson teed this up on Twitter. And even though commentary focused on the prevailing bond levels today, what Gross is saying is that the bottom in yields was actually July 2016, 18 months ago. That’s a low that was triggered by Brexit by the way. Once the Deutsche Bank bankruptcy crisis ended in September 2016, the direction of yields turned up. A year and a half later, Gross thinks it’s time to call time on the bond bull market.
Source: Bill Gross Investment Outlook: Bonds, Men, It’s About Time, Jan 2018, Janus Henderson