Bill Gross warns of structural risks in credit and bond markets

Bill Gross, co-founder of PIMCO, has issued a warning regarding the structural deterioration of global balance sheets across the government, corporate, and personal sectors. Gross noted that total U.S. credit across government, mortgage, and corporate segments has reached approximately $84 trillion. He argued that current credit growth is barely sufficient to support an economy advancing at roughly 8% in nominal GDP terms, creating a fragile equilibrium.

A primary concern cited is the AI investment supercycle. Gross described the hundreds of billions in borrowing by hyperscalers to fund data centers as an anomaly by historical standards, noting that forecasted AI-related investments for 2027 may be funded entirely by debt.

Regarding investment strategy, Gross advised against holding long-term debt, suggesting that investors stick to one-year Treasury bills due to expected volatility in benchmark 10-year Treasury bonds. He also cautioned against stocks at record levels, warning that higher yields over time could contract profit margins.