“The Trumpian Fox” may have “entered the Populist Henhouse”, but Bill Gross of Janus Capital thinks that President-elect Donald Trump’s economic policies will be anything but good for the “little man”. In fact, they “favour capital versus labour, markets versus wages”. Gross is also “doubtful” that Trump’s idea about allowing companies to repatriate trillions of dollars stashed abroad will boost investment. A similar scheme in 2004 saw most of the repatriated funds spent on “dividends, corporate bonuses, and stock buybacks”.
Given all this, says Gross, Trump’s “short four-year term” is “likely to be a damaging one for jobless and low-wage American voters”. Yet it also puts companies in a “no-win situation”. While wages continue to fall relative to profits, “angry voters” will “reject establishment parties in almost every future election”.
This will encourage “growth-negative policies revolving around trade and immigration”. Investors who are currently euphoric about the prospect of tax cuts need to realise that “higher deficits resulting from lower taxes raise interest rates and inflation, which in turn have the potential to produce lower earnings” and falling share prices.
Politics aside, companies face several “structural headwinds… demographic ageing, technological displacement of jobs (robotisation), deglobalisation, and overleveraged balance sheets”. In short, “there is no new Trump bull market in the offing”. Instead, those investing in shares need to lower their expectations and “be satisfied with 3%-5% globally diversified returns”. And be warned – “the populist sunrise has barely broken the horizon”.