Bill Gross: Why the 'new neutral' could prove hostile to investors

Changes in real interest rates have taken investors into uncharted waters in recent years. Janus' Bill Gross asks where they will go from here.

In his latest investment outlook, the former PIMCO bond star argued history has disproved the theory of the real natural rate of interest being relatively constant. Central bank policy, structural changes in real GDP growth rates, demographics, and the globalisation of finance have had a significant impact, he said. He said central bankers still believe in their 3.75% “nominal blue dots” which equate to the 1.75% real rate of interest which has been in vogue for 30 years.   “[Janet] Yellen herself has admitted that the real neutral rate changes and that it depends on a variety of fact...