| NEW YORK, April 13
NEW YORK, April 13 Influential bond investor
Bill Gross on Thursday stepped up his warning to investors not
to be tempted into buying equities, high-yield junk bonds and
other asset classes, given the possibility that U.S. President
Donald Trump might fail to enact policies that fuel economic
"Equity markets are priced for too much hope, high-yield
junk bond markets for too much growth, and all asset prices
elevated to artificial levels that only a model-driven,
historically-biased investor would believe could lead to returns
resembling the past six years, or the decades predating Lehman,"
Gross said in his latest Investment Outlook. "High rates of
growth, and the productivity that drives it, are likely distant
memories from a bygone era."
Gross, who runs the Janus Global Unconstrained Bond Fund,
earlier this year said investors should not be allured by the
"Trump mirage," of 3-4 percent economic growth and the "magical
benefits" of tax cuts combined with deregulation.
Trump told the Fox Business network this week that he wants
to tackle the healthcare issue before tax reform. "I have to do
healthcare first, I want to do it first to really do it right,"
Trump said that although tax reform is critical to growth
and businesses large and small, "hundreds and hundreds of
millions of dollars" would be saved by repealing and replacing
Obamacare, which would help with tax reform.
Gross said U.S. stock and corporate debt markets have
rallied on expectations that tax reform would get done sooner
rather than later.
"Can the Trump agenda re-create 3 percent growth?" Gross
asked in his April report to clients. "Well now, that is the
investment question of the hour/day/decade and its conclusion,
unlike romance on a desert island, will determine the level of
asset prices across the investment spectrum."
Growth is productivity dependent, Gross said, noting that
Northwestern University economist Robert Gordon has long argued
that lower productivity may now be a function of having picked
all of the "low-hanging fruit," such as electrification and
other gains from 20th century technology.
"Then there is the obvious connection between recent years'
low levels of private sector investment, which perhaps begs
another question as to why that is so low," Gross said.
"Optimists claim that the future benefit of smartphones and
medical technology have yet to have an impact and that
eventually - much like the introduction of the automobile - they
will lead to a resumption of historical trends."
(Reporting by Jennifer Ablan, editing by G Crosse)