World’s Top Bond Investor Sees Status Quo Continuing
The world’s two biggest bond investors have come up with two different messages for investors.
While Ray Dalio is bullish on the future of the U.S. economy under the President-elect Donald Trump, legendary bond investor Bill Gross warns that those who voted Trump to the most powerful position in the world will soon regret their decision.
Advertisement
“His tenure will be a short four years but is likely to be a damaging one for jobless and low-wage American voters,” Gross wrote in his letter. “They were the force for Trump’s flipping the Midwest into a Republican Electoral College victory. But while the Fox promised jobs and to make America great again, his policies of greater defense and infrastructure spending combined with lower corporate taxes to invigorate the private sector continue to favor capital versus labor, markets versus wages, and is a continuation of the status quo.” (Source: “Monthly Investment Outlook,” Janus Capital Group, November 16, 2016.)
Gross said he voted for neither Trump nor his Democratic rival, Hillary Clinton, adding that voters effectively put the fox in charge of the henhouse.
The former head of Pacific Investment Management Company, LLC (Pimco) and present manager of a bond fund at Janus Capital Group says Trumpism, including tax cuts, a corporate tax holiday, and massive infrastructure spending, will continue to benefit elite investors at the expense of hard-pressed workers.
Ray Dalio, on the other hand, said yesterday in his latest comments on the post-election outlook that Trump policies will help the U.S. economy, as he warned that more government spending will boost inflation and end the bull market for bond investors. Investors seem to believe Ray Dalio’s assessment of the economy. Since the Trump election win, the U.S. markets have risen to new record highs, while bonds suffered huge losses on prospects of accelerating inflation.
“Trump policies also appear to favor the repatriation of trillions of dollars of foreign profits at extremely low cost under the logic that the money will be spent for investment here in the U.S. Doubtful. The last time such a “pardon” was put into law in 2004, no noticeable pickup in investment took place,” Gross said in his letter, questioning Trump’s logic that U.S. companies will be more willing to invest locally due to his tax policies.
