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All financial markets ‘increasingly at risk,’ Bill Gross warns

Bill Gross speaks at the Morningstar Investment Conference in Chicago, Illinois, June 19, 2014.

Jim Young/Reuters

Investors should be wary as low interest rates, aging populations and global warming inhibit real economic growth and intensify headwinds facing financial markets, according to Bill Gross.

"Don't be mesmerized by the blue skies," Gross, manager of the Janus Henderson Global Unconstrained Bond Fund, wrote in an investment outlook released Tuesday. "All markets are increasingly at risk."

Stocks have recently traded near record highs, even as the U.S. economy is expected to grow just 2.2 per cent this year and 2.3 per cent in 2018, according to data compiled by Bloomberg. That's extending a long-term trend dubbed by some as "the new normal" or "secular stagnation" and dominated by central bank-engineered low and negative interest-rate policies. They drive up prices on assets such as stocks and real estate while doing little to create real economic expansion, according to Mr. Gross.

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"Capitalism's arteries are now clogged or even blocked by secular forces, which when combined with low/negative yielding 'safe' assets promise to stunt U.S. and global growth far below historical norms," Mr. Gross wrote.

Mr. Gross, 73, has been a frequent critic of central bank policies, warning in a December 2015 investment outlook that investors will "look around like Wile E. Coyote wondering how far is down." Current market risk is the highest since before the September 2008 collapse of Lehman Brothers Holdings Inc., Gross said last week at the Bloomberg Invest New York summit.

His $2-billion Janus Henderson Global Unconstrained Bond Fund returned about 1.4 per cent this year through June 9, trailing 79 percent of its peers, according to data compiled by Bloomberg. It has returned 5.6 per cent since Mr. Gross took over management of the unconstrained fund on Oct. 6, 2014, after his ouster from Pacific Investment Management Co.

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