«Don’t own bonds, be cautious with stocks»: that is the message just delivered by Bill Gross, the American investor best known as the co-founder of Pacific Investment Management Company (PIMCO), one of the world’s leading asset managers, historically recognized for its specialization in the bond market.
Not by chance has Gross long been called the “Bond King.” His recommendations, set out in a Financial Times column titled “Don’t own bonds and be cautious with stocks,” carry that much more weight as a result.
To make his case, Gross even reached for the line from Shakespeare’s Hamlet, «Neither a borrower nor a lender be,» while adding a caveat: «Without credit and lending our modern economic society would not grow much, AI or no AI.»
Why Bill Gross is saying stop to bonds and urging caution on stocks
The investor recalled that «credit expansion is a fundamental and necessary condition for fueling nominal GDP growth, both here in the United States and anywhere else in the world.» By way of example, «if credit growth were to slow to around 4%, financial markets would probably feel the consequences of the squeeze.»
At the same time, «the expansion of balance sheets, whether personal, corporate or sovereign, must be balanced over the medium to long term,» because «too much debt can mean too much risk.»
Gross also issued a warning on equities, since «too much equity capital could translate, in some weak productivity cycles, into lower earnings-per-share growth.»
Against that backdrop, he wrote in the FT that «the balance sheets of households, corporations and governments have become unbalanced,» and that growth could suffer as a result. One example of the imbalance, he stressed, is the recent AI boom, which is being financed through the debt markets.
AI giants’ bond issuance has become anomalous: «Houston, we’ve got a problem»
Bond issuance by the American Big Tech companies has been massive, in Gross’s view «anomalous by historical standards.» To describe the phenomenon, the market guru reached for another famous quotation: «Houston, we’ve got a problem,» pointing to «the hundreds of billions of dollars that hyperscalers are borrowing to finance data center expansion.»
It may be a «good bet on the ability to sustain future growth. But if it is not, “Houston, we’ve got a problem.”»
After all, «the trillion dollars of AI-related investment expected for 2027 will probably be funded entirely by debt, now that positive cash flow has disappeared.»
The risk does not end with the borrowing spree of AI companies and the corporate world in general.
Gross’s alert on US public finances: debt «reaching record levels»
Gross also pointed to an «equally significant» threat from public finances, warning that «even the most optimistic economist must begin to recognize that US debt levels are reaching record levels for a period of “peace,” with a net debt-to-GDP ratio around 100%,» at a time when «the aging of the baby boom generation will increase future costs of Social Security, Medicare and Medicaid.»
Years will still pass before there is a «transition to a future population made up mainly of younger generations.» For Gross, then, «the implications of all these dynamics for financial markets are obvious, at least by common sense.»
In fact, markets have been confirming his warning for some time, as shown by the turmoil that has hit government bonds around the world in recent weeks. It has affected not only US Treasuries but also eurozone sovereign bonds, as shown by surging yields on Italy’s BTPs (the country’s benchmark government bonds), on France’s OATs (increasingly closely watched) and on the debt of the euro area’s main economies.
The 10-year BTP-Bund spread (the yield gap between Italian and German benchmark bonds) has also spoken clearly, returning to 100 basis points, as have the results of some auctions held by Italy’s Treasury (MEF).
Gross went on to say that while «unbalanced balance-sheet growth, fueled by rising debt» has been an important driver of economic expansion so far, it may well end up penalizing it in the future. At the same time, this growth has already resulted in «higher inflation today, with little room for relief in the future, absent containment measures across fiscal and debt markets worldwide.»
Gross’s advice on bonds: «Don’t own bonds, except 1-year Treasury bills»
Having laid out these reflections, Gross turned to what investors should do now, from a practical standpoint.
«In a situation like this, my view is: don’t own bonds, with the exception of 1-year Treasury bills, which now yield 4.55%. And be cautious on stocks, which are trading at record levels, since higher rates over time will end up compressing the profit margins» of the companies concerned.
«Forget equity markets as you have known them,» but opportunities exist
Gross advised investors to be ready for the end of equity markets «as we were used to them» and also for «greater price volatility in 10-year Treasuries.»
On individual sectors, the PIMCO co-founder said he is «cautious on hyperscalers unless they trade at price/earnings ratios below 20.»
That said, «although I do not own these stocks, the yields offered by Verizon and AT&T may be attractive for some more conservative US investors, even though their businesses are now threatened by SpaceX’s Starlink Mobile in the mobile phone market.»
Besides issuing warnings, then, Gross also pointed to potential investment opportunities.
The fixed-income fund Gross names, and his investing motto
The investor added that «there may also be opportunities in fixed-income funds trading at a discount to net asset value (NAV).»
One example is «the Nuveen Preferred & Income Opportunities Fund,» which «trades at a discount of about 8% to NAV and offers a yield of 11%,» although, like «other funds in the sector, it would suffer from a rise in short-term rates higher than expected.»
Maximum caution, then, from the Bond King, who stated his investing motto for the moment: «Preserve and protect is my investment motto right now.»
Note: quotations from Bill Gross were translated from the Italian original and may differ slightly in wording from the Financial Times column.
Editor’s note
This article was originally published in Italian on money.it by Laura Naka Antonelli on October 01, 2026 as «“Basta con le obbligazioni, siate cauti con le azioni”. Parola di Bill Gross (Pimco)». It has been translated and adapted for an international audience by the Money.it International desk.
