Billionaire investor Bill Gross is predicting that value stocks like IBM and Altria Group are likely to fare better than growth stocks like Apple or Amazon.com in the near term, due to a correlation with real interest rates. U.S. real yields – which adjust for inflation – have been declining in response to the Federal Reserve’s aggressive monetary actions over the past few months to limit the economic fallout of the coronavirus pandemic. Gross, who co-founded Pacific Investment Management Company, then spent four years at Janus Henderson before leaving in 2019 to manage his own money, said that the reason that the “Fab 5 stocks” and growth stocks in general had done “so fabulously well” centers on falling real interest rates that “are still reaching historic lows.”
