Prestigious investor Bill Gross has warned that he expects big problems in the future if the US Federal Reserve (Fed) continues to raise the Interest rates.
“The economy has been boosted by huge amounts of trillions of dollars in tax spending, but ultimately, when that runs out, I think we’re going to have a mild recession, and if interest rates keep going up, we’ll have more than that,” Gross told CNBC on Tuesday.
A tightening of monetary policy would further rattle capital markets, according to Gross. The so-called bond king and co-founder of PIMCO pointed to Tuesday’s move in global bond yields following the Bank of Japan’s decision to extend the yield on its 10-year Japanese government bond.
Meanwhile, an interest rate hike portends problems for the real estate sector at the retail level, which could face “potential default,” Gross said. However, he expects the residential sector to perform a little better and not be affected in the same way that happened during the Great Recession.
“I think, going forward, if the Fed continues to raise rates, it will serve as a warning to the housing market,” Gross said. However, this expert has stated that, “in terms of a debacle, as in 2007, 2008, I do not think we are heading for the same scenario.”
While at PIMCO, Gross helped manage the world’s largest fund. Later, he ran a fund at Janus Henderson until he retired in March 2019.