famous investor total bill said he expects big trouble ahead if the Federal Reserve continues to raise interest rates.
“The economy has been supported by trillions of dollars in fiscal spending, but eventually when that money is used up I think we’re going to have a mild recession and if interest rates continue to rise… , we’ll have more,” Gross said Tuesday on CNBC’s “Half hour report.”
“We have the potential for chaos in the financial markets,” he said.
According to Gross, the tightening of monetary policy will continue to stir up capital markets. The so-called king of bonds and co-founder of Pimco pointed out Tuesday change in global bond yields next The Bank of Japan’s decision to extend the yield on 10-year Japanese government bonds.
Meanwhile, a rate hike heralds trouble for commercial real estate, which could face “potential default,” Gross said. However, he hopes that residential real estate will fare slightly better and won’t suffer to the same extent as it did during the Great Recession.
“I do think, going forward, if the Fed continues to raise rates, then your ability to equitize some of your housing, which is falling in price, will be severely limited, and so that will be a caution for the housing market,” Gross said. “But in terms of failure, like in ’07, ’08, I don’t think we’re going there.”
While at Pimco, Gross helped run the world’s largest mutual fund. He later ran a fund at Janus Henderson until he retires in March 2019.