Gross, who oversees the Janus Global Unconstrained
Bond Fund, said Fed policymakers "seem to now
appreciate the hole that they have dug by allowing
interest rates to go too low for too long. Despite
reasonable growth, some of them recognize the
system's distortion if only because inflation is
going down, not up, in the process."
Gross said the Fed now recognizes zero percent interest rates are moving money into the financial sector for arbitrage and profits but very little of that is going into the real economy for investment.
The Fed said on Wednesday the U.S. economy was expanding "at a solid pace" with strong job gains in a signal that the central bank remains on track with its plans to raise interest rates this year. But the central bank left the door open for a later move as policy makers hinted at wariness about low inflation, slow global growth, a stronger U.S. dollar and international market turbulence.
In his fifth investment outlook letter since joining Janus Capital Group Inc, Gross said the Fed will raise interest rates in late 2015 but "It won't however, move quickly – capitalism has been damaged by the change in rules since 2008. Caution, therefore, will prevail in the U.S. and elsewhere for a long time."
The Fed's slow approach will support financial markets, Gross said. "Bonds despite their ridiculous yields will not easily be threatened with a new bear market," he said. "Investors should expect as well, that because of the slow unwinding of zero percent rates in the U.S., that U.S. and global stocks will be supported. Their heyday is over however."
(Reporting By Jennifer Ablan; Editing by Chizu Nomiyama)
Gross said the Fed now recognizes zero percent interest rates are moving money into the financial sector for arbitrage and profits but very little of that is going into the real economy for investment.
The Fed said on Wednesday the U.S. economy was expanding "at a solid pace" with strong job gains in a signal that the central bank remains on track with its plans to raise interest rates this year. But the central bank left the door open for a later move as policy makers hinted at wariness about low inflation, slow global growth, a stronger U.S. dollar and international market turbulence.
In his fifth investment outlook letter since joining Janus Capital Group Inc, Gross said the Fed will raise interest rates in late 2015 but "It won't however, move quickly – capitalism has been damaged by the change in rules since 2008. Caution, therefore, will prevail in the U.S. and elsewhere for a long time."
The Fed's slow approach will support financial markets, Gross said. "Bonds despite their ridiculous yields will not easily be threatened with a new bear market," he said. "Investors should expect as well, that because of the slow unwinding of zero percent rates in the U.S., that U.S. and global stocks will be supported. Their heyday is over however."
(Reporting By Jennifer Ablan; Editing by Chizu Nomiyama)
