Bill Gross predicts value outperforms growth, based on rates correlation

NEW YORK (Reuters) – Billionaire investor Bill Gross is predicting that value stocks like IBM IBM.N and Altria Group MO.N are likely to fare better than growth stocks like Apple AAPL.O or Amazon.com AMZN.O 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. The yield on the 10-year Treasury Inflation-Protected Security (TIPS) US10YTIP=RR has been trading with a negative yield since late March and is now minus 0.803%, near an all-time-low.