President-elect Donald Trump will only add to a “long-term global debt crisis,” bond guru Bill Gross said Tuesday in his latest market message.
For investors, the near-term ramifications likely will be more gains in the stock market. But the picture down the road isn’t as simple.
“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, etc.,” Gross, who runs the $1.7 billion Janus Global Unconstrained Bond fund, said in a letter to clients. “But longer term, investors must consider the negatives of Trump’s anti-globalization ideas which may restrict trade and negatively affect corporate profits.”
Indeed, equities have rallied since the election, with the S&P 500 registering about a 5 percent price gain.
But Gross has been critical of the man who will be the country’s 45th president, saying Trump’s policies will be “damaging” to the working class. He also predicted Trump will serve only one term.
His December newsletter is titled “Red is the New Green,” a play on the prison drama “Orange is the New Black.” Debt is the “red” that is imprisoning the global economy, according to the analogy.
Gross points out eight ways that policymakers have approached the debt crisis. Those methods include central banks buying debt and keeping interest rates low, talking about normalizing rates without actually doing it, and liberalizing accounting rules to mask debt issues.
As it pertains to Trump, he cites three strategies that will be utilized.
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