Bill Gross Cautions Against 'Buying the Dip' Amid Concerns Over Market's Uncertain Future

Key Takeaways

Bill Gross, the former "Bond King" from PIMCO, warns against rushing to buy the dip during market drops.
Experts suggest alternative strategies for navigating market volatility instead of impulsive dip-buying.

Sometimes, relatively good news over a long enough time makes for bad habits. In recent years, drawdowns that have been followed by comparatively quick recoveries have often rewarded those "buying the dip"—market drops from recent averages. But those favorable market conditions were never meant to last, a hard truth often crowded out by Reddit threads and headlines from less-scrupulous investing sites promising major gains ahead with not a little macho language about going in where angels fear to tread.

Historically, drawdowns don't always just bounce back—witness the lost decade of the 2000s when the S&P 500 Index had negative returns after the dot-com bust and global financial crisis. Legendary investor Bill Gross, the "Bond King" behind $270 billion in funds at PIMCO, thus has a blunt warning for those looking to scoop up supposed bargains during market tumult. "I think it's a very dangerous period of time. It's not necessarily a period for stockholders to reach in and try and grab a bargain, like catching a falling knife," he told CNBC. We explain his rationale below.

Buy the Dip, Catch the Knife

As turbulence hit markets again in 2025 on the heels of the Trump administration's announcement of sweeping tariffs, retail investors rushed in to "buy the dip," only to see the market move from a correction (10% or more drop from a recent high) to perilously close to a bear market (20%) after pouring billions in. The highest level of retail buy-in in a decade, according to J.P. Morgan (JPM), the dip-buying in the days after the announcement was just more money chasing after bad. Meanwhile, institutional investors were betting against many of the stocks retail investors favored: small caps and big names like Amazon.com Inc. (AMZN).

The danger in trading this way, according to Gross, lies in mistaking a current downturn for a routine correction. "It's an epic event," Gross said about the April 2025 drawdown, though his advice is evergreen for other periods of tumult. "It's not something where you can time quickly for a market bottom." He compared the tariff situation to the historic 1971 end of the gold standard, meaning it could represent a fundamental shift, not a temporary setback, something some commentators with just a few years of experience don't have the perspective to handle.

For example, following the dot-com bubble burst, even blue-chip tech stocks like Microsoft Corporation (MSFT) took 14 years to recover to their previous highs. During that era, many investors who thought they were "buying the dip" in the early stages of the decline ultimately watched their investments lose much of their value.

The psychology that makes buying the dip appealing is what makes it dangerous. Investors naturally want to feel they're getting a bargain, but as Gross warns, you might only be buying more trouble.

What Gross Recommends Instead

Gross doesn't suggest shunning the market altogether. "What I've been doing... is buying domestic companies, buying telephone companies like AT&T [Inc. (T)] and Verizon [Communications Inc. (VZ), buying tobacco stocks that yield 7% to 8%, like Altria [Group Inc. (MO)], buying domestic companies," he said.

Gross's focus on domestic investments with strong dividends offers a solid defensive approach during market turbulence—one that most experts suggest. Gross also reminded investors of an often-overlooked option: "My cash portfolio yields 4.3% and it doesn't go down," he said—a simple yet effective strategy during uncertain times.

Fast Fact

What Gross means by his "cash portfolio" isn't simply money stashed in a safe—that earns nothing—but a strategic allocation to high-yielding money market funds, short-term Treasury bills, and other cash equivalents that provide income while preserving capital during market volatility.

The Bottom Line

Gross's warnings about buying the dip come from decades of market experience that few can match. While the temptation to snatch up seemingly discounted stocks remains strong, you would have much in common with most investors in finding it difficult to differentiate the "epic economic and market event" Gross describes or a routine correction. Whatever you do, "don't sell in a panic," he said, suggesting the virtue of patience at a time when it's hard to have any.