Top Money Managers Urge Capital Preservation

Bill Gross and Jeffrey Gundlach describe investment priorities

Bill Gross, former manager of the world’s largest bond fund, recommends investors focus on protecting their money in 2016 rather than reaching for higher returns. Gross has been critical of central bank efforts to stimulate the global economy by printing money, comparing central banks to “casinos that print money as if they were manufacturing endless numbers of chips that they’ll never have to redeem.” For these and other reasons, Gross warns of a potential wipeout in equities: “One day the negative feedback loop on the real economy will halt the ascent of stock and bond prices and investors will look around like Wile E. Coyote wondering how far is down.” Gross has urged investors to gradually de-risk portfolios, placing greater emphasis on “return of your money than a double-digit return.”

Gross’ view is echoed by other notable market heavyweights. Jeffrey Gundlach, manager of the $52 billion DoubleLine Total Return Bond Fund, says, “This is a capital-preservation market, not a money-making environment.” Blackrock’s top investment strategists (responsible for the management of $4.5 trillion in assets) recently stated investors should expect “little or no” appreciation in U.S. equities in 2016. Mohamed El-Erian, Allianz’s Chief Economic Adviser, is also wary of the current investing environment, primarily because of what he deems “unhinged markets” in commodities, emerging market currencies, and high-yield bonds.

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