While timing the end of a bull market is difficult, the next 12 months would probably see a turning point, he wrote.
"Knowing when the 'crowd' has had enough is an often frustrating task, and it behoves an individual with a reputation at stake to stand clear," he wrote. "As you know, however, moving out of the way has never been my style."
Even as the US economy expanded at a 5 per cent annualised pace, the fastest since the three months ended in September 2003, tumbling oil prices and concerns Greece will exit the euro have sent American equities to the biggest decline to start a year since 2008.
The Standard & Poor's 500 Index dropped 0.9 per cent yesterday in New York for a fifth day of declines. The gauge rallied 11 per cent in 2014 and 30 per cent in 2013.
Gross has in recent years stumbled in the bond market. His former flagship fund, the Pimco Total Return Fund, trailed a majority of competitors three out of the past four years.
In 2011, he took a hit after selling Treasuries in preparation for the end of a three-decade-long bull market.
Treasuries rallied that year, returning 9.8 per cent, as investors rushed to the safety of government-backed debt amid a European sovereign-debt crisis. As his fund trailed rivals in 2011, Gross called the year a "stinker" in a letter to clients titled "Mea Culpa".
After rebounding in 2012, Pimco Total Return again trailed peers in 2013 as Gross emphasised shorter-term debt over longer-dated securities.
He left the money manager in 1971 to join Denver-based Janus.
The JUCIX has lost 0.8 per cent in the past three months, trailing 51 per cent of comparable funds, according to data from Morningstar.
Gross said investors should hold high-quality assets with stable cash flows, such as Treasuries, high-quality corporate bonds, and stocks of companies with little debt and attractive dividends.
"With moments of liquidity having already been experienced in recent months, 2015 may see a continuing round of musical chairs as riskier asset categories become less and less desirable."
Fed 'unlikely' to lift interest rates
Bill Gross says the Federal Reserve won't raise interest rates until late this year "if at all" as falling oil prices and a stronger US dollar limit the United States central bank's room to increase borrowing costs.
While the Fed has concluded its three rounds of asset purchases, known as quantitative easing, interest rates in almost all developed economies will remain near zero as central banks in Europe and Japan embark on similar projects, Gross said yesterday in an outlook published on the website of Janus Capital Group, where he runs the US$1.2 billion ($1.5 billion) Janus Global Unconstrained Bond Fund.
"With the US dollar strengthening and oil prices declining, it is hard to see even the Fed raising short rates until late in 2015, if at all," he said. "With much of the benefit from loose monetary policies already priced into the markets, a more conservative investment approach may be warranted by maintaining some cash balances. Be prepared for low returns in almost all asset categories."
Benchmark US oil prices fell below US$50 a barrel yesterday.
