As the US stock market’s remarkable five-year surge begins to lose steam, investors should temper their expectations and prepare for modest returns, advises renowned investor Bill Gross. While a complete reversal is unlikely, the billionaire investor suggests adopting a cautious approach, maintaining average exposure to equities and shifting focus towards defensive stocks with a limited allocation to bonds.
Gross’s words of caution join a growing chorus of warnings that the market’s record-breaking highs may be unsustainable. Concerns about the AI-driven rally, geopolitical uncertainties, and the impending US presidential election are all contributing to a sense of unease among investors.
In his latest outlook, Gross weighs the negative factors, including lofty valuations, geopolitical risks, and an unsustainable government deficit, against more positive trends, such as inflation nearing the Federal Reserve’s target and increasing investment in AI. He also notes the potential impact of a Democratic sweep in the election, which could lead to higher corporate taxes.
The billionaire investor points to Warren Buffett’s record cash holdings as a sign of caution, indicating a “bumpy road ahead.” Gross, who retired from the money management business in 2019, continues to share his investment insights and trade ideas through his website and social media.
Among his preferred investments are high-yielding mortgage REITs, municipal income trusts, and master limited partnerships tied to oil and gas contracts. He also favors utility companies with potential buyout opportunities. By adopting a defensive stance and diversifying their portfolios, investors can better navigate the uncertain market landscape ahead.
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