Bond King' Bill Gross Warns of Potential Recession and Overvalued Stocks

Bill Gross, renowned as the “Bond King” and a billionaire co-founder of Pimco, expressed significant concerns about the current state of the stock market and the broader U.S. economy. Highlighting overextended stock valuations, he warned of a potential major recession if the Federal Reserve does not lower interest rates this year. Gross pointed out the incongruity of the S&P 500’s record highs, given a price-to-earnings ratio around 19 and a real interest rate of 1.8%. He emphasized that the Federal Reserve’s interest rate hikes, from nearly zero to over 5% since early 2022 to tackle inflation, have not led to a material decrease in stock valuations. This situation, Gross argues, risks a debt spiral and necessitates a shift towards safer assets, potentially impacting investments in stocks versus traditional safe havens like bonds, gold, and silver.