Bill Gross says Trump would be worse for bond markets than Biden

Open the US Election Countdown newsletter for free

Stories that matter about money and politics in the race for the White House

A Donald Trump victory in the US presidential election would be “more bearish” and “disruptive” for bond markets than a re-election of Joe Biden, according to Bill Gross, a long-time fixed income investor.

Gross told the Financial Times that Trump's return to the White House would exacerbate the growing US deficit that had troubled him in the market, earning him the nickname “Bond King” when he ran Pimco Asset Management.

“Trump is the most pessimistic of the candidates simply because his platforms call for continued tax cuts and more expensive things,” Gross said, though he noted that the Biden presidency has also been responsible for trillions of dollars in deficit spending.

“Trump's election will be more disturbing.”

Gross's comments come less than six months before the US presidential election scheduled for November, and just days before a Manhattan jury begins deliberations in the “silent money” case in which Trump could become the first former US president to be convicted on charges. a crime.

Trump, a Republican, is ahead of Biden, the current Democratic president, in most national opinion polls as well as several recent polls of voters in key swing states that are likely to decide the election. He has also received high-profile endorsements in recent days, including from former rival Nikki Haley and billionaire GOP donor Stephen Schwarzman.

But Gross's comments undermine one of Trump's main arguments during the campaign: that he would be better at managing the US economy and financial markets than Biden.

One of Trump's major economic plans is to pledge to make his 2017 tax cuts permanent, a move that the Committee for a Responsible Budget, a think tank, expects to cost $4 trillion over the next decade.

In an interview that ranged from his current market picks to the origins of his rare stamp collection, Gross explained what he learned while compiling 40 years of his monthly investment forecasts in a new book.

Rising US deficits have turned Gross away from the bond strategy that made him famous Latest forecasts That “total return is dead”. The US fiscal deficit was 8.8 per cent of GDP last year – more than double the 4.1 per cent deficit figure recorded for 2022.

“The deficit is the culprit. 2 trillion dollars [annual] Increase in supply. . . “It will put some pressure on the market,” he said.

Instead, Gross said, he was putting his fixed-income allocations into a closed-end fund that invests in preferred securities, contingent equity, and up to 20 percent of private credit, while using some leverage to boost returns.

“It's definitely more attractive to an investor who doesn't need a lot of liquidity.”

Gross is also relatively pessimistic about US stock markets, warning that investors “need to temper their expectations” rather than expect an indefinite repeat of last year's 24 percent return for the S&P 500.

“Over time, markets should mean a comeback. To me, that means prices will rise less than they are now.”

“If people expect 10 or 15 percent, [they] “We will be working with smaller budgets.”

Gross, who still spends five or six hours a day monitoring the markets through his personal Bloomberg terminal, also has huge investments in tobacco stocks and securities known as master limited partnerships, a tax-advantaged way to finance pipelines and other businesses.

Either way, he seeks to profit from corners of the market that others avoid. Many investors avoid tobacco because of its health effects, while low-income companies lose some or all of their tax advantages when held in mutual funds and retirement vehicles.