PIMCO's Gross: The cult of equity is dying

PIMCO's Bill Gross has questioned the long term inflation-adjusted returns of equities and argues the "cult of equity is dying" to be replaced by the "cult of inflation".

The manager of the $259bn PIMCO Total Return fund said stocks have shown a persistent but recently fading inflation adjusted 6.6% real return (known as the Siegel constant) since 1912 that "Generations X and Y perhaps should study more closely". "Common sense would argue that appropriately priced stocks should return more than bonds. Their dividends are variable, their cashflows less certain and therefore an equity risk premium should exist which compensates stockholders for their junior position in the capital structure. "Yet despite the past 30-year history of stock and bond returns...