Rally Likely At Peak

The recent stock market uptick is likely at its peak,according to Bill Gross,co-CEO and co-Chief Investment Officer at PIMCO with Mohamed El-Erian.We're seeing the new normal for the economy:slower growth,about half what it used to be.Mr.Gross admitted they try and keep their heads relatively small and shrunken in this business.Overconfidence is the spell of doom.
One may expect a very low return on assets,Bill Gross feels.We've re-normalized,although the price-to-earnings ratios tend to fake us out.To the extent that we see Gross Domestic Product growth at 2% in real terms,versus the old normal of 4%,assets will return less.We're living in an economy of deleveraging.Loans will be less available.Homeowners must put 20% down now,for example.There is a very significant shift in terms of risk preferences and regulation.
Mr.Gross' views are at least partially echoed by other observers of the financial markets.Christine Romer,Chairman of the White House Council of Economic Advisors,says the consensus for GDP growth is in the range of 2-3% for the next four quarters.