Bill Gross is Looking for More Downside

Bill Gross has a checkered history calling the future direction of the U.S. stock market. His call for Dow 5,000 was near the bear market lows of 2002.  But that does not stop him from trying:

“There’s no doubt this recent upward movement in yields justifies a 5%-10% correction in stock markets,” said the longtime manager of the $103.1 billion Pimco Total Return Bond Fund MarketWatch

Of course, like any talking head, he is hedging a bit…

But he added that market prices don’t always move in tandem with changing fundamental concerns about valuations between stocks and bonds. “Whether that (a stock correction) happens or not in the immediate future is subject to anyone’s guess at this point,” Gross said in a telephone interview following his release of a new commentary on developments in bond markets.

Gross, like many pundits, expects the Cerberus deal for Chrysler to be the big litmus test.  Everyone expects the financing of the deal to hit a snag. And he dismisses speculation about short-term rates, believing that the Fed has been disintermediated in a way, with high-yield and private equity managers now calling the shots. Scary thought, indeed.

The credit market are jittery for sure, and any noticeable improvement could be postponed until the August vacation season winds down. Gross might like to stand on his head, but Wall Street’s warriors like to ponder the big picture from the beach. Things are getting hairy, but the private equity bid underpinning the market might not get pulled until the fall. September and October can be funny that way.

Bond Guru sees possible 5%-10% drop in stocks
Marketwatch
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