Tags: Gross | stock | market | overreacted

Pimco’s Gross: Market Plunge After Fed Minutes 'Much Ado About Nothing'

Thursday, 05 Apr 2012 07:17 AM

By Dan Weil

The Standard & Poor’s 500 Index dropped a combined 1.4 percent Tuesday and Wednesday, with most of the decline coming after Tuesday’s release of minutes from the latest Federal Reserve meeting, which showed that it’s not ready to ease further yet.

Very few economists thought the Fed was about to provide further monetary accommodation, given that the economy grew 3 percent in the fourth quarter.

So it’s clear that the stock market overreacted, says Pimco’s legendary bond fund manager Bill Gross.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

"It's much ado about nothing or much ado about a little," he tells CNBC. "We should think of the Fed as a chess game where some of the pieces are more important than others."

Fed Chairman Ben Bernanke represents the king, Fed Vice Chairwoman Janet Yellen the queen, New York Fed President William Dudley a rook, and the rest of the Fed policymakers represent knights.

"You have a story when some of these major pieces, one of the three, basically concedes and says, 'Check mate,'” Gross says.

“But we haven't seen that. Until that happens, this wordsmithing . . . is relatively unimportant."

Some economists say there’s still a good chance the Fed will ease in the future. The economy’s strength is preventing it now, Steven Ricchiuto, chief economist at Mizuho USA, wrote in a note obtained by Bloomberg.

But, “I still expect that the data will give the Fed the opportunity to do more,” he says.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

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