Gross: Golden age of bonds, stock returns is an unrepeatable black swan

Widely followed bond fund manager, Bill Gross, warns that bond and stock returns realised in the last 40 years are "a grey if not black swan event that cannot be repeated," adding that the "markets are entirely different" now. Investors should not expect 7% returns on bonds or returns in the high single digits or double digits on stocks anymore, he warns. Low and negative interest rates not only hurt savers, he says, but also the broader economy. "Ultimately, they have to move back up and I think a certain number of Fed governors realise that the normalisation process is necessary in order to save business models and to save capitalism basically because capitalism doesn't work at 0% and it doesn't work at negative interest rates," he said, adding that investors should "basically go the other way" and hold liquid cash, rather than buying corporate bonds, high-yield bonds or riskier stocks.

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Bill Gross has some bad news for investors. In his June investment outlook released Thursday, the widely followed bond fund manager contended that bond and stock returns realized in the last 40 years are "a grey if not black swan event that cannot be repeated." Investors should not expect 7 percent returns on bonds or returns in the high single digits or double digits on stocks, Gross told CNBC on Thursday. "The markets are entirely different and it would pay to travel to Mars as opposed to stay on Earth, because the returns here are very, very low," the manager of the Janus Capital Unconstrained Bond Fund, said on CNBC's "Power Lunch".

Bill Gross Reuters

Gross said easy central bank policy could hold down bond returns. Central banks in Europe and Japan have adopted negative interest rates, while the U.S. Federal Reserve's target rate is at 0.25 to 0.50 percent. German and Japanese 10-year bonds currently have negative yields, while their 30-year bonds yield less than 1 percent. The U.S. 10-year Treasury note yield sat around 1.8 percent Thursday.