"Being different is absolutely essential if you want a chance at being superior," says Howard Marks. Hoping to return to the top of the heap in fixed income performance, Bill Gross is at odds with many on the Street, loading the portfolio of the Total Return Fund (ETF: BOND) with Treasurys in the belly of the curve.
The play is a bet on Gross' "new neutral," in which the neutral Fed Funds rate is at least a couple of hundred basis points less than commonly believed. If he's right, Treasurys with duration in the 3-7 year area should benefit the most as rate hikes are postponed or come in at a far slower pace.
"Once they see the whites of the eyes of full employment, they will want to normalize rates at a faster clip," says Jonathan Beinner, co-head of global fixed income at Goldman Sachs Asset Management, summing up the conventional Street wisdom.
Previously: Pimco: "New neutral" explains Treasury rally