Just a couple of days ago, Patron posted an interview link where Gross suggested a conservative approach until ?Q202?, yet now he wants corporates? Has something changed in his view of the markets' risk appetite? I guess his message is consistant if one reads carefully...
Message 16614419
Gross: I wouldn't say we are moving further away from the riskier side. {cut} I don't think inflation will be as much of a problem as others think -- in fact, it should decline from 2.5% to 1.5% over the next 12 months. If so, the long-term 30-year U.S. Treasury at 5.5 % represents decent, although not outstanding, value. An investor might also think about buying 30-year corporate bonds with A ratings, or higher, and survivability.
{cut}
My clue that it is time to get back into other bond sectors (corporates, emerging markets, high-yield) will be when I see a revival of confidence and risk-taking among consumers and businesses. This is one of the most critical indicators of a recovery, an economic snapback. Investors should also use this as an indicator that it might be time to get back into the stock market. You see, stocks, emerging market bonds, corporate bonds and high-yield bonds are all related to the economy in economic terms -- all four are not performing well currently and that's because we're in a recession.
Once confidence returns, the economy will turn, these four investments will turn and investors should consider reallocations. I see this turn taking place sometime during the second quarter of 2002. But, should the somber attitudes and cautious behavior we are now seeing in the aftermath of the attacks continue to persist, then recovery will be postponed deep into 2002. |
