Bill Gross, co-chief investment officer at Pacific Investment Management Co., said there is no evidence that investment is increasing under the Federal Reserve's quantitative easing program.
“All of the money being created and freed up is elevating asset prices, but those prices are not causing corporations to invest in future production,” Mr. Gross wrote in his monthly investment outlook posted on the company's website. Lower interest rates are being used “to consume as opposed to invest,” he said.
Investors should recognize that asset and currency prices ultimately rest on the ability of the economy to grow, Mr. Gross wrote. If real growth is stunted in the U.S. and globally, then investors should also acknowledge “bite-size” future returns and the growing risks of “misguided” monetary and fiscal policy that might disrupt financial markets at some point. The so-called fiscal cliff might be the first of a series of disruptions, although Mr. Gross expects some type of compromise on the possible tax increases and budget cuts.