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Then he got into bedbugs. His preferred market sector: gas pipelines, for which he estimates returns between 9% and 12% for premium stocks with certain tax advantages. This is also why he suggests investors take a look at Magellan Midstream Partners (MMP), BP Midstream Partners (BPMP) and Enterprise Product Partners (EPD).
Growth stocks, especially the biggest IPOs of 2020, including Snowflake, Airbnb and Doordash, will struggle to meet the expectations of what Gross calls “the Robinhoods of day-trading,” he added. . The same goes for PSPCs or special acquisition companies and “Teslas of 2020”.
“This market is fueled – yes – by intense speculation, but also by corporate profits financed by the central bank and financed by the central bank, which, when discounted at nominal interest rates close to zero and in many negative cases, produce record stock prices. Said Gross.
He attributes their potential for declining performance to the Federal Reserve’s commitment to keep interest rates near zero for years.
“Much of the market appreciation over the past two years, especially for growth stocks, has been due to falling real interest rates,” Mr. Gross said. A rally that will only continue if real yields remain “substantially negative”, he continued.
More broadly, the investment legend has warned that the scarring impact of the coronavirus on the economy – coupled with a stock market pumped with Fed help and fiscal stimulus – could start to reflect the Nordic and European stock markets. This is of concern to Gross, who cites that the markets in these two countries are trading at a lower price-to-earnings ratio than some of the more recent IPOs and stocks like Microsoft currently traded on Wall Street.
“How many tax packages can the stock market endure before realizing that GDP is now opioid-like, increasingly dependent on Washington dollars that turn our Republican capitalist giant from the supply side into one – panting! – ‘universal income- like’ sluggo similar to Europe? To avoid this, it seems to me, unemployment needs to return to pre-covid levels. Fed Chairman Jerome Powell said it – but we’re far, far from it, ”Gross said.
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