PIMCO: Consider the new neutral

PIMCO: Consider the new neutral. Bill Gross believes there's a new neutral interest rate environment where normal rates are nearer to zero than the Feds presumed 1.75% or the Taylor rule, which assumes 2%. If The New Neutral is closer to 0%, then all asset markets, which are priced off of it, are less bubbly than they appear at the moment. P/Es of 16-17x seem reasonable. If The New Neutral is closer to 0% than 2% - if Taylor is replaced by PIMCO's New Neutral - then risk assets, even without QE checks, can stand on their own two legs. We expect bonds to return 3-4% over the next 5 years and stocks perhaps 4-5%. If central banks proceed cautiously, there's no need for another Lehman Brothers, but as well, there will be no interest rate propellant for double-digit asset returns. Those days are gone. (VIEW LINK)


Livewire News brings you a wide range of financial insights with a focus on Global Macro, Fixed Income, Currencies and Commodities.

Expertise

No areas of expertise

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.