Bill Gross, wrote a letter to his clients at Janus Capital on Tuesday, warning them that the “good times are over.”
Gross who now manages $1.2 billion for Janus Capital’s Global Unconstrained Bond Fund told clients: “when the year is done, there will be minus signs in front of returns for many asset classes.”
The one time bond king went on to say that timing the end of the bull market may be difficult:
“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,” Gross wrote. “As you know, however, moving out of the way has never been my style.”
Gross recommended investors to hold high-quality assets with stable cash flows, including Treasuries, high-quality corporate bonds and equity of companies that offer attractive dividends with little debt on the books.
Gross concluded by suggesting that 2015 may prove to be a “round of musical chairs” as riskier asset categories become less and less desirable.
Todays Other Top Stories
Learn Bonds: – Making sense of falling oil prices and ECB QE. – If the goal of QE is to lower interest rates/borrowing costs to stimulate the economy, we believe we can safely say that ECB QE should be largely ineffective. All this will probably do is maintain the current status quo in Europe.
ETF Daily News: – Is 2015 the year for municipal bond ETFs? – The U.S. muni bonds market had a great 2014 with its returns just below the S&P 500 and the Dow Jones Industrial Average. These two blue chip indices advanced a respective 15.3% and 11.5%. With the S&P 500 also crossing the 2,000 mark, muni bonds turned out to be the third best performing category gaining 8.7% (per Wall Street), its three-year best.
Bloomberg: – Munis face 2015 headwind as record market contraction set to end. – After the biggest annual gain since 2011, municipal debt faces a headwind in 2015 as the $3.6 trillion market is projected to expand for the first time in five years.
Zacks: – 5 Top-ranked municipal bond mutual funds for high yield. – 5 top rated municipal bond mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future.
Barron’s: – Strong dollar trend will boost bonds, small stocks. – The euro may be headed for a round trip. Since its birth in 1999 at a rate of 1.1685 per U.S. dollar, the euro spent its formative years trading at lower prices. Then since 2003, with a small exception, it spent the rest of its life at higher prices. On several occasions it has been 30% or higher.
Bloomberg: – A few trades moving $12 trillion in bonds points to volatile ’15. – Bond markets are once again being plagued by a drop in trading. While traders are just returning from vacations and being less active than usual, prices are swinging. The moves have been exaggerated by Treasury trading that yesterday was 11 percent below last year’s average.
FT: – Finra to investigate US bond trading. – A top regulator for the US brokerage industry said it would begin examining the bond market, including the operations of electronic debt trading platforms that were proliferating as investors seek new ways of trading fixed-income securities.
John Lombardo: – Does the bond market rally still have legs? – In a world awash with higher risk sovereign credits with far lower yields, US Treasury bonds are likely to continue to be well bid.
Bloomberg: – Free money in bond markets shows global economy still struggling. – The world’s richest nations are borrowing for free. Taken together, the average 10-year bond yield of the U.S., Japan and Germany has dropped below 1 percent for the first time ever, according to Steven Englander, global head of G-10 foreign-exchange strategy at Citigroup Inc.
WSJ: – Advisers’ forecasts for stocks, bonds and more. – (Subscription) It looks like another good year for big U.S. stocks in 2015 and another uncertain one for bonds—but individual investors shouldn’t make major changes to their portfolios based on these predictions, financial advisers say.
FT: – Deflation is a rising threat for markets. – (Subscription) Why did so many market pundits fail to foresee the decline in yields across the developed world in 2014?
FT: – 30-year bonds lead rally in Treasuries. – (Subscription) 3.06 per cent will seem further away by the end of the day. According to a survey by Bloomberg, that’s what Wall Street strategists expect the ten-year Treasury bond to yield by the end of the year, as the US economy improves further and the Federal Reserve starts to raise interest rates for the first time since the financial crisis.
DoctoRX: – Is a bullish ‘perfect storm’ brewing in Treasury bonds? – Treasury bonds may be attractive both to investors and savers seeking safety with income as well as to speculators seeking capital gains.
MarketWatch: – U.S. 10-year Treasury yield falls below 2 pct for first time since Oct. – The yield on benchmark 10-Year U.S. Treasury bonds fell below 2 percent on Tuesday as investors piled into safe-haven assets in the face of a weak outlook for global growth and inflation, and growing fears Greece may leave the euro zone.
Investment Grade Bonds
Bloomberg: – Caesars swaps ruling heads to arbitration panel, ISDA says. – An arbitration panel will rule on whether $26.9 billion of credit-default swaps linked to Caesars Entertainment Corp. (CZR) should be settled after a committee of bonds traders failed to make a decisive ruling.
High Yield Bonds
George Putnam: – Where have we been and where are we going? – We remain wary of bonds in 2015 because interest rates have to rise sometime, and 2015 may finally be the year when it happens. Also, with respect to high yield bonds, we expect defaults and bankruptcies to pick up in 2015.
Businessweek: – Top bond managers plan for energy rebound. – Bond-fund managers in the U.S. that beat their peers last year by bucking Wall Street predictions that interest rates would rise say beaten-down debt of energy companies is attractive for 2015.
Bloomberg: – Argentina bond bulls predict world-beating 2015 returns. – Argentina defied a default to deliver some of the world’s biggest bond returns in 2014. This year, the end of Cristina Fernandez de Kirchner’s tenure as president is forecast to produce even bigger gains.
Kiplinger: – Don’t part with preferred stocks. – In the winter of 2013–14, steals and deals were abundant in such categories as municipal bonds, real estate investment trusts and preferred stocks. Today, though, following big price run-ups, most income categories are no longer cheap. But neither are they overvalued. So what’s an income investor to do?
ETF Trends: – Short-duration bond ETFs to mitigate potential volatility. – Due to ongoing uncertainty over the Federal Reserve’s interest rate outlook, fixed-income investors should stick to short-term bond exchange traded funds.
Investorplace: – The only move you need to make for your ETF bond portfolio in 2015. – The performance of an investor’s bond portfolio is going to motivate changes this year.
Investopedia: – 2015’s most promising ETFs. – The lesson 2014’s top exchange-traded funds appear to teach is paradoxical: Bad news can be very good news, at least if you see it coming.
Reuters: – BlackRock’s mutual funds see record inflows in 2014. – BlackRock’s mutual funds posted record inflows in 2014 of $18.9 billion, according to data provided to Reuters by Morningstar.
WSJ: – Beware of nervous fund managers. – (Subscription) A study shows that gun-shy investment pros do worse, and risk losing job.
30-yr Treasury yield falls to 2.51%, just below 2.52% all-time record low yield reached in Dec 2008 and again in June 2012.
— AnthonyValeri (@Anthony_Valeri) January 6, 2015
Curve is flatter but not outright flattening, 2yr is bid today. Going to take a while for bad news to be good news for front end.
— Colin Cody (@ColinACody) January 6, 2015
Muni cash market has been on fire yesterday and today
— David Schawel (@DavidSchawel) January 6, 2015
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