-
Billionaire investor Bill Gross says the stock market’s record-breaking run will slow.
-
He advises investors to reposition themselves toward defensive and high-yield stocks.
-
His favorite investments right now include MLP pipelines and municipal income funds.
While this year’s record rally continues to impress on Wall Street, billionaire investor Bill Gross isn’t so sure the bull market will keep up its rapid pace for much longer.
Investors should reposition toward defensive and higher-yielding stocks as momentum wanes, according to the latest note from the so-called Bond King. He also recommended low exposure to fixed income, after previously criticizing the current state of government bonds.
“Not a bear market, but it’s not the same bull market anymore,” Gross said, adding that stocks will deliver “low buy positive” returns going forward.
Gross also mentioned four of his favorite investments right now:
The first is Everything, an electric utility that is up 5% year to date. It’s a buyout with 10% upside potential over the next 12 months, he said.
Gross was also touted multiple limited liability company pipelines, an investment he often emphasizes as a fruitful alternative to bonds. He cited that MLPs offer 8% tax-deferred returns. In May, he said MLPs were “almost as good as AI.”
Gross also touched on the theme of alternatives to Treasury bills Annaly Capital Managementa high-yield mortgage REIT.
He also sees municipal income funds as a worthwhile investment, as many offer tax-free returns of more than 7%. Gross mentioned the DWS municipal income trust as an example, but noted that there are between 20 and 30 others to choose from.
“7% may not last forever, but for now these funds are trading at 6-8%,” he said.
Gross doesn’t go so far as to predict that the bull run is about to crash, only that some headwinds are looming. These range from extended valuations to a range of macroeconomic and geopolitical headwinds.
Gross specifically mentioned higher corporate taxes under Kamala Harris’ presidency, as well as a slowdown in growth as military tensions continue to escalate globally. Rising deficits — a problem the investor has repeatedly warned about — will ultimately slow spending.
Gross also referenced legendary investor Warren Buffett’s record cash pile, which some see as a sign the market could sell off sharply soon. For Gross, at least, this means there is a “bumpy road ahead.”
His note also noted some positives to counter the stock market headwinds, such as declining inflation and continued investment in artificial intelligence.
Read the original article on Business Insider
