In a surprising turn of events, renowned billionaire investor Bill Gross, often referred to as the "Bond King," has taken a contrarian stance on Treasury bonds, urging investors to buy bonds amidst a market rout. Gross, the former chief investment officer of Pacific Investment Management Co. (Pimco), took to the social media platform X (formerly known as Twitter) to share his recommendation.

Gross advised his followers to "invest in the curve" on bonds, which have recently experienced a sharp selloff. This contradicts the prevailing sentiment on Wall Street, where many investors have been shorting or betting against bond prices as Treasury bond yields rise. However, Gross now believes that it is time to scale back such bets on yields rising further.

The widely-held belief of a "soft landing" for the U.S. economy, with slow growth but no recession, is being challenged by Gross. He argues that recent indicators, such as regional bank carnage and a rise in auto delinquencies to historical highs, point towards a significant slowdown in the U.S. economy. In fact, Gross boldly predicts a recession in the fourth quarter.

Gross's statement comes on the heels of another influential investor, billionaire Bill Ackman, cautioning against remaining short on bonds at current long-term rates due to the increased risks in the global market.

While these opinions run counter to the expectations of some observers who anticipate yields to rise even further, Gross and Ackman are convinced that now is the opportune time to buy bonds. Gross dismisses the previous mantra of "higher for longer," indicating a shift in market sentiment.

Interestingly, despite the market rout and the impact it has on Treasury yields, Federal Reserve Chairman Jerome Powell perceives the rise in yields as beneficial in tightening financial outlooks. This has led Powell to suggest that there may be less need for additional rate increases in the future.

The sentiment expressed by Powell aligns with the views of Professor Jeremy Siegel from the Wharton School at the University of Pennsylvania. Siegel believes that concerns about high rates persisting for an extended period have pushed long yields higher. He suggests that the recent spike in inflation has led to increased compensation demanded for owning bonds. Siegel emphasizes that this disruption in the market is not a short-term phenomenon and advises investors to adopt a long-term approach.

Furthermore, Siegel predicts that the bond market's impact is compelling the Federal Reserve to shift into "permanent pause mode," indicating a potential pause in rate hikes. This notion has gained support among recent Fed officials, with unanimity and no dissent being noted.

In light of Gross's recommendation to buy bonds and the broader market dynamics, investors will likely pay close attention to the upcoming economic data and the responses from the Federal Reserve. The possibility of a recession in the fourth quarter raises significant concerns about the future direction of the economy, reinforcing the importance of a cautious and strategic approach to investing.

In conclusion, the "Bond King" Bill Gross and billionaire investor Bill Ackman's call to buy bonds amidst a market rout and their predictions of an economic slowdown challenge prevailing market sentiment. With indicators pointing towards a potential recession in the fourth quarter, investors are advised to reconsider their positions and adopt a longer-term perspective in navigating the changing market conditions.