Drugmakers in the Standard & Poor’s 500 Index are up 16 percent and producers of household goods have risen 9.7 percent in 2012. Utilities have fallen about 2 percent for the worst performance among the 10 major industries in the gauge.
El-Erian said Dec. 19 that the first part of 2012 would be “risk off” as Europe’s sovereign-debt crisis encouraged demand for safety. Yields on 10-year U.S. Treasuries rose to 2.21 percent on March 30 from 1.88 percent at the start of the year, while the Standard & Poor’s 500 Index jumped 12 percent. For the year to date, the stock index also is up 12 percent.
The U.S. economy will grow 2 percent next year and 2.8 percent in 2014, the Paris-based Organization for Economic Cooperation and Development said last month. That is faster than the average for the OECD’s 34 members of 1.4 percent in 2013 and 2.3 percent in 2014.
Both Rosenberg and Levy foresaw the bursting of the housing bubble in 2007, the former when he was chief economist for North America at Merrill Lynch & Co. in New York. They’ve generally been more pessimistic than the consensus of economists since then, with Levy saying the U.S. is experiencing a “contained depression,” and Rosenberg incorrectly forecasting the U.S. would relapse into recession at the start of this year. The previous slump began in December 2007 and lasted 18 months.
More Downbeat
El-Erian and his colleagues at Pimco also have tended to be more downbeat. The 54-year-old former International Monetary Fund economist first used the term “new normal” in May 2009 to describe the probable medium-term path of the global economy. For the U.S., that meant annual growth of about 2 percent.
Since the recovery began in the middle of 2009, GDP has expanded by an average of 2.2 percent, in line with the Pimco forecast and short of repeated projections for faster growth by the Federal Reserve and the White House.
Pimco’s Total Return Fund, the world’s largest mutual fund, is up 10.3 percent this year, beating 95 percent of similarly run mutual funds, according to data compiled by Bloomberg.
‘A Stinker’
It has attracted about $17 billion in net new money in 2012, according to Chicago-based research firm Morningstar Inc., after losing $5 billion to withdrawals in 2011, when it suffered what William Gross, the company’s co-chief investment officer with El-Erian, called “a stinker.” It eliminated U.S. Treasuries early in the year and missed a rally when investors rushed to the safety of government-backed debt.