Janus’ Bill Gross thinks the Fed needs to raise rates now.
In his latest monthly investment outlook, the legendary bond manager urges the Federal Reserve to raise interest rates for the sake of the US economy’s long-term health.
Directly addressing the Fed, Gross writes:
My advice to them is this: get off zero and get off quick. Will 2% Fed Funds harm corporate America that has already termed out its debt? A little. Will stock and bond prices go down? Most certainly. But like Volcker recognized in 1979, the time has come for a new thesis that restores the savings function to developed economies that permit liability based business models to survive – if only on a shoestring – and that ultimately leads to rejuvenated private investment, which is the essence of a healthy economy. Near term pain? Yes. Long term gain? Almost certainly. Get off zero now!
This is Gross’ first investment outlook since the meeting last week in which the Fed elected to keep interest rates pegged near 0%, which is where they have been since December 2008.
About half of Wall Street economists expected the Fed to raise rates, with many arguments making a similar point to what Gross has urged on Wednesday – namely, that the Fed’s 0% interest-rate policy is the thing holding back the economy, not just now but over the long-term.
The last time we heard from Gross, he was telling folks that basically everything was terrible (at least regarding investing returns).
And on this front, things haven’t changed much.
In short, Gross thinks the Fed is ruining capitalism.