Bill Gross says he is amazed at what American voters have “done to themselves” by voting in Donald Trump as their next US president, stating he will serve a short, but damaging four-year term.
Meanwhile, he warns investors that there is “no new Trump bull market in the offing”.
The Janus Capital fixed income manager, who confirms he did not vote for either Trump or his Democrat rival Hillary Clinton, says the president-elect’s policies of defense and infrastructure spending and lower corporate tax rates favour capital over labour and markets over wages.
He says he feels amazed and “almost amused bewilderment at what American voters have done to themselves”.
“The Trumpian Fox has entered the Populist Henhouse, not so much by stealth but as a result of Middle America’s misinterpretation of what will make America great again.
“His tenure will be a short four years but is likely to be a damaging one for jobless and low-wage American voters.”
Gross adds that investors should be satisfied with 3 to 5 per cent globally diversified returns.
“Investors must drive with caution, 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 disputes Republican claims that the US has one of the world’s highest tax rates at 35 per cent, stating that the S&P 500’s 50 largest companies pay an average 24 per cent, including state, local and foreign regulations.
He also disputes that Trump’s plans to favour the repatriation of trillions of dollars of foreign profits at low cost will be beneficial for the wider economy.
“Apple or any other large U.S. corporation can borrow the money they need here in the US at historically low interest rates to fund investment.
“A few have, but over $500bn annually in recent years has gone to the repurchase of corporate stock and the increase of earnings per share, instead of earnings and GDP growth.”
Gross says the last time such a “pardon” came into law in 2004 most of it ended up in dividends, corporate bonuses and stock buybacks.