Bill Gross: Trump's unrealistic growth target

The growth rates of 3% per year that Donald Trump is promising to deliver in the US are unrealistic, says bond fund manager Bill Gross of Janus Capital. They "belong to a bygone era". Potential growth today is much lower, due in part to weak productivity. While innovation "may be changing the face of finance and investment", this hasn't filtered through to the wider economy. "Productivity has flatlined over the past five years."

An ageing population could also hit demand, "since older people don't buy as many goods and services as younger people", but need "much more healthcare". Gross thinks America and Europe could ultimately end up following Japan, where the high proportion of elderly people has slashed growth and expanded debt. This represents a "problem for both growth and capitalism".

While central banks around the world continue to keep interest rates low to boost growth, "the price of credit is as low as it can possibly go", so it's hard to see how they could fall further.Even in the US, 30-year government bonds yield barely more than 2% a year. These policies may be encouraging people to "stuff their money into their mattresses, instead of productively investing it".

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With shares also expensive, the combination of high valuation and low growth means the trade-off between risk and reward is not in investors' favour. Indeed, "instead of buying low and selling high, you're buying high and crossing your fingers". Even in a best-case scenario, "low returns are inevitable" and there is a good chance they could end up being negative for both bonds and shares.