Bill Gross , a widely followed investor once known as the bond king, said he’s negative about both stocks and bonds, only seeing very limited opportunities in the market. “I’d pass on stocks and bonds in terms of future total returns,” Gross, the former chief investment officer and co-founder of Pimco, wrote in his new investment outlook blog. Gross believes that the Federal Reserve is unlikely to lower interest rates in a significant way in the face of inflation, so bond prices may not go higher anytime soon. At the same time, he thinks equities have reached overvalued territory after a double-digit rally earlier this year. “Unless Chair [Jerome] Powell and company can significantly lower real 10 year Treasury rates from 2.25%, investors may eventually realize that bonds are a better deal than clearly overvalued stocks headed into an economic slowdown/recession,” Gross said. “Personally, I don’t believe Powell will be willing or able to lower short rates significantly in the face of a 3% inflation future.” Gross told CNBC on Tuesday evening that he believes surging Treasury yields, which rattled stocks this week, have the potential to shoot even higher in the short run, with the benchmark 10-year rate possibly testing 5%. Still, the 79-year-old investor was able to point to a few opportunities. He said the “best bets” are arbitrages in mergers and acquisition deals, such as Microsoft’s deal to acquire Activision, which he said should close in two weeks or so. He also finds pipeline Master Limited Partnerships attractive. He told CNBC’s ” Last Call ” Tuesday that his favorite name in the space is Energy Transfer. “Pipeline MLPs are still a favorite of mine due to their favorable partnerships tax benefits but pricewise are a little toppy due to oil prices that seem vulnerable to the downside,” Gross said.
