Ex PIMCO stars criticise Fed

Recently Alliance chief Mohamed El-Erian described the Federal Reserve’s attempts to prepare markets for the normalisation of US interest rate as “wishy washy” https://www.yieldreport.com.au/news/el-erian-says-fed-missed-its-chance-to-raise-us-rates/. His former colleague at PIMCO, Bill Gross, has joined the criticism of the US central bank saying to raise rates now would create financial market instability. However, he recognised a return to a neutral setting for official rates at 2.00% was needed. “The Fed is beginning to recognize that 6 years of zero bound interest rates have negative influences on the real economy – it destroys historical business models essential to capitalism such as pension funds, insurance companies, and the willingness to save money itself.” His advice to investors? “Cash or better yet ‘near cash’ such as 1-2 year corporate bonds are my best idea of appropriate risks/reward investments.” Gross writes a monthly report for bond fund Janus Capital in which he discusses the state of markets and his views on various matters. As the former chief investment officer at what was once the world’s largest bond fund, his views attract considerable attention.