Bill Gross:New Normal Seen Persisting in the New Year

Bill Gross,co-founder of Pacific Investment Management Company,or PIMCO,sees stubbornly high or even increased unemployment for 2013,resulting in weak fixed income and stock returns and a surge in gold prices.Mr.Gross issued his firm's "Fearless Forecast" for the new year recently.It shows basically that the economy will trundle along in the new normal as defined by PIMCO:high unemployment;slow growth;and orderly deleveraging by developed countries.
GDP growth will be 2% or less on account of globalisation,deleveraging and demographic headwinds.Stocks and bonds will return less than 5%.The market will also lack the tailwind of the Fed's quantitative easing.The future price tag of Fed policies will be in the form of inflation and devaluation of currencies,relative either to themselves or to the prices of commodities in less limitless supply,such as oil and gold.
Future growth must come from investment in education and infrastructure.It has to be less consumption-oriented.It takes a determination and a  primal-spirited momentum to put this economy back in the hands of the private sector.
Mr.Gross manages the company's iconicTotal Return Fund,which returned a strong 10.5% in 2012.The economy and global economy are limited,he pointed out.PIMCO is a two trillion dollar firm.We'll cross our fingers and we won't be totally confident,but we think we can do it again,the"Bond King"predicted.
PIMCO Total Return Fund Instl(PTTRX)

Life on the Financial Plateau

Stephen Wood,PhD,Chief Market Strategist at Russell Investments,thinks it could be an O.K. year.Earnings estimates are gonna decelerate,but the S&P 500 index is doing real well in terms of earnings per share.A 13% gain for the year will be predominantly based on earnings.From a corporate perspective,the U.S. looks relatively healthy.
The consumer is not dead;just deleveraging.Just lean into the consumer a little bit.Consumers saving is something we've seen for some time.
We've recovered and kind of plateaued out.It's not a recession,but it's not gonna be strong growth,either.Look at what's happened to the Treasury in the U.S.
Ultimately,we've got a long time to solve the problems-and they can be solved,which isn't necessarily the case in Europe.The collapse of Lehman Brothers on September 15,2008 really caught everyone by surprise.In Europe,it's not gonna be that startling.The question is,who's gonna be the one who gets hit,in Dr.Wood's view.
As its purpose,Russell Investments improves financial security for people.Founded in 1936,it has 163.4 billion dollars in assets under management for individuals,institutions and financial professionals.It also creates performance benchmarks in the form of the Russell indexes.

Accepting The Economic Conditions

Bob Doll,a Vice President at BlackRock,the world's largest money manager,notes that we had +10% growth from early 2007-early 2008,but we have to recognize we are now in a deleveraging world.We're gonna be in for a number of years of below trend growth of 2%,rather than 3.5% as it had been.
You can't target where this money is gonna go.If consumers are deleveraging,you really have to hit them over the head to change that,and Mr.Doll doesn't think that will be any time soon.People are being cautious,paying down the debt,and there's no confidence.The Federal Reserve has to buy time here,be steady as she goes,accept slow growth.
The Fed has announced it is maintaining its balance sheet,buying Treasuries to keep borrowing costs low in support of growth,or at least make a gesture to inspire confidence.
BlackRock(BLK)

The Business Climate:Confidence An Absolute Factor

Lakshman Achuthan,Research Director of the Economic Cycle Research Institute,thinks the global industrial growth rate is slowing.The question is,does the slowdown turn into an outright recession?Every time you have a slowdown,the risk of recession does go up.
Confidence absolutely factors into Mr.Achuthan's work.It is a large driver of the business cycle,both from the consumer and the corporate side.You have a giant era of pessimism following a crisis.That's exactly what you're seeing now,Mr.Achuthan believes.
Byron Wien,a Vice-President at The Blackstone Group,L.P.,notes that people aren't buying stocks because they're worried there's a structural impairment.We're deleveraging,and on that basis growth is gonna be slow.This is a fear trade.
Since 2000,there's been zero return on equities.One percent return on Treasuries is better than zero.Eighty percent of the time,the market does go up over the course of a decade,but the days of a 15% return over a 20 year period are not coming back,Mr.Wien cautioned.
Treasury yields have been pushed to record lows as investors distrustful of the recovery seek the traditional safe havens.
The Blackstone Group,L.P.(BX)