Gross Sees Trump’s Anti-Globalization Agenda Hurting Profitsby
Janus manager says Trump stock rally likely to be short-term
Gross’s unconstrained fund has returned 4.9% this year
President-elect Donald Trump may boost stock markets in the short term but his policies will likely limit long-term economic growth by restraining trade and corporate profits, according to Bill Gross, the billionaire bond manager.
Trump’s campaign promises included renegotiating trade deals, cutting tax rates, such as those imposed on corporations, and increasing spending on infrastructure. The policies may fuel inflation and drive up the federal deficit without generating sustainable productivity growth, according to Gross.
“There’s no doubt that many aspects of Trump’s agenda are good for stocks and bad for bonds near term – tax cuts, deregulation, fiscal stimulus,” Gross, who manages the $1.7 billion Janus Global Unconstrained Bond Fund, wrote in his December investment outlook. “But longer term, investors must consider the negatives of Trump’s anti-globalization ideas which may restrict trade and negatively affect corporate profits.”
Shares hit a record high on the Dow Jones Industrial Average Monday, and have risen 4.8 percent since the Nov. 8 election. Yields on U.S. 10-Year Treasuries climbed to 2.39 Monday, up 29 percent since Nov. 8.
Trump’s policies are likely to strengthen the dollar, which “weighs heavily on globalized corporations, especially tech stocks,” Gross wrote.
He described Trump as following a “whatever it takes” agenda of the current establishment to run monetary policy and drive financial markets, which will eventually lose effectiveness.
Gross’s unconstrained fund is up 4.9 percent through Dec. 2, outperforming 67 percent of its Bloomberg peers.
“Unconstrained strategies should increase cash and cash alternatives,” Gross wrote. “Bond durations and risk assets should be below benchmark targets.”