Billionaire Bill Gross doesn’t believe that the recent stock market rally following President-elect Donald Trump’s victory is indicative of a trend, and warns investors to be wary.
Despite an uptick that has lifted the Dow Jones Industrial Average (DJIA) more than three percent and the S&P 500 almost two percent since the election, Gross sees Trump’s policies and future plans (the ones outlined, at least) to be detrimental in the long term. (Source: “Bill Gross: Trump’s Presidency Will Be ‘Damaging,’ Won’t Spur A New Bull Market,” Forbes, November 16, 2016.)
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“Investors must drive with caution,” Gross wrote in his latest monthly investment outlook to clients on Wednesday, “understanding that higher deficits resulting from lower taxes raise interest rates and inflation, which in turn have the potential to produce lower earnings and P/E ratios.”
Gross, who is the manager of Janus Global Unconstrained Bond Fund, didn’t vote for either major party candidate, but believes that Trump’s administration will be especially harmful to the U.S. economy. He predicts that Trump’s policies will be “damaging” to many of the jobless and low-income Americans who voted him in. He then went on to write that he believes Trump will be a single-term president.
Gross’s main concerns revolve around two central areas: increased deficit and tax reform.
With Trump’s proposed infrastructure and military spending coupled with tax cuts across the board, Gross believes this will cause a large deficit going forward. He was especially critical of tax deals in order to repatriate the trillions of dollars stashed abroad by large companies.
“The last time such a “pardon” was put into law in 2004, no noticeable pickup in investment took place,” he said.
He also complained about the lack of focus on robots threatening jobs, lack of social policies in the mold of FDR to help protect citizens, and an otherwise lack of vision displayed by either major party.
But for now, he’s very low on Trump.
“I write in amazed, almost amused bewilderment at what American voters have done to themselves,” said Gross, comparing Trump’s victory to letting a fox in the henhouse.
