Bill Gross: Put your money in cash and corporate bonds

Investors should put their money in cash, or as close to cash as they can get, in the current market volatility, warns bond king Bill Gross.

The manager of the Janus Global Unconstrained Bond fund says that in the current turbulent markets investors should head to short-dated corporate bonds and cash.

“High-quality global bond markets offer little reward relative to durational risk. Private equity and hedge related returns cannot long prosper if global growth remains anemic,” he says in his market outlook update.

“Cash or better yet ’near cash’ such as one or two year corporate bonds are my best idea of appropriate risks/reward investments. The reward is not much, but as Will Rogers once said during the Great Depression: ’I’m not so much concerned about the return on my money as the return of my money.’,” he says.

Gross predicts that with global monetary policy where it is, and not looking to change any time soon, returns will be hard to find. 

“Gobal fiscal (and monetary) policy is not now constructive nor growth enhancing, nor is it likely to be. If that be the case, then equity market capital gains and future returns are likely to be limited if not downward sloping,” he says.

Research from Hargreaves Lansdown found that safe haven assets had performed the best in the recent market volatility, backing up Gross’ view.

The Investment Association’s UK Gilts sector was the best performing for August, returning 1.23 per cent, followed by the IA UK Index Linked Gilt and IA Global Bonds sectors. 

In order the improve the investing environment, the global economy needs “major global policy shifts” to emphasis government spending over austerity, says Gross.

“The global economy’s finance-based spine is so out of whack that it is in need of a major readjustment. In this case, even the best of chiropractors could not even attempt it,” he adds.