Famed investor Bill Gross said he expects big problems if the Federal Reserve continues to raise interest rates.
“The economy has been bolstered by huge amounts of trillions of dollars in tax spending, but when that’s gone I think we’ve got a mild recession, and if interest rates keep going up we’ve got more than that,” Gross said in Tuesday’s “mid-term report.” ‘ by CNBC.
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“We have potential chaos in the financial markets,” he said.
According to Gross, a tightening of monetary policy would further confuse the capital markets. The so-called bond king and co-founder of Pimco pointed to the move in global bond yields on Tuesday after the Bank of Japan decided to hike the yield on its 10-year government bond.
Meanwhile, a rise in interest rates spells trouble for commercial real estate, which could face “potential defaults,” Gross said. However, he expects residential real estate to do slightly better and not be hit as hard as it was during the Great Recession.
“I think if the Fed keeps raising rates in the future, the ability to convert some of your real estate that’s going down in price into equity is going to be severely limited, and that’s going to serve as a warning in the housing market,” Gross said. “But in In terms of a debacle like ’07, ’08, I don’t think we’re going there.”
While at Pimco, Gross helped manage the world’s largest mutual fund. He then managed a fund at Janus Henderson until his retirement in March 2019.