Bill Gross Favors T-Bills Over Stocks, Bonds as Recession Looms Large

What You Need to Know

“Be patient. 12-month Treasuries at 2.7% are better than your money market fund and almost all other alternatives,” he wrote in his latest blog.

Bill Gross has one piece of advice for those looking to buy dips in bonds, stocks and commodities: just don’t.

The former bond king said one-year Treasury bills are a better alternative to almost any other investments, as the Federal Reserve’s interest-rate hikes lead to a “strong” possibility of recession.

Gross, co-founder of bond powerhouse Pacific Investment Management Co., has been urging investors to take a cautious stance since the start of the year, a call proven proficient as stocks and fixed-income assets suffered historical losses this year.

Despite the Wall Street adage that there’s always a bull market somewhere, “I am straining to find one now,” Gross, 78, wrote in his investment outlook. “Be patient. 12-month Treasuries at 2.7% are better than your money market fund and almost all other alternatives.”

Gross, whose net worth amounts to $1.2 billion according to Bloomberg’s Billionaires Index, retired from asset management in 2019, but still regularly updates his investment views on his website.

See: What Happened to Bill Gross: Details of the Bond King’s Rise and Fall

Gross writes that the Fed’s Chair Jerome Powell and his colleagues could raise the benchmark borrowing costs to 3.5% “ASAP,” from the current level of 1.75%. That is in line with the bond market’s current pricing of the peak of the Fed fund rate, which is expected to be reached by the first quarter of 2023.

Gross drew the conclusion after using Bollinger Bands, a technical analysis using standard deviations of historical levels of the Fed fund rate, to predict what Fed will do, “to safely create a mild recession that in turn will gradually lower inflation.”