Bill Gross, chief investment officer for PIMCO, said the recent push higher in the stock market likely reflects a decline in real interest rates, and that forecasts for double-digit earnings growth next year are not realistic.
“I do think stocks are in la-la land when they start to focus on renewed double-digit profit gains in 2008. That’s just not going to happen,” said Gross, who was speaking via teleconference at Reuters Investment Outlook 2008 Summit in New York. PIMCO is the world’s largest bond fund.
Profit gains for Standard & Poor’s 500 companies have fallen sharply in recent quarter after more than four years of double-digit increases. Large write-downs in the financial sector have been the biggest negative recently on earnings results.
