Bond fund manager Bill Gross, no fan of high stock prices, predicted a 5% to 10% correction on Wall Street with a spillover effect from the subprime crash and a weak junk bond market.
Rising yields on corporate debt justify a stock correction, said Gross, chief investment officer of Pacific Investment Management Co. in Newport Beach.
Change also is in store for private equity firms and hedge funds, according to Gross. Cheap financing that has fostered their buying binge likely will come to an end, Gross said in a newsletter posted on Pimco’s website.
“The tide appears to be going out for levered equity financiers and in for
the passive owl money managers of the debt market,” he wrote.
That could be good for the bond market, which has lagged of late.
“I’m cheering the resolution of more favorable yields,” Gross said. “It’s time bond investors took back the profits that hedge-fund managers and private-equity managers have been making for some time.”
