Since President-elect Donald Trump’s historic victory on November 8th, the stock market has been making history as well — including another record close for both the Dow and Russell 2000 on Tuesday. However when it comes to bonds, legendary investor Bill Gross is more concerned about future performance.
“You know I think the 10-year is appropriately priced at the moment. It’s on a technical ledge, on a long term yield downtrend, and 240 is that level. So, I think it stabilizes for a while, but beware in terms of the bond market. Red might be the new green, and red of course is a negative sign opposed to a positive one,” said Gross, manager of the Janus Global Unconstrained Bond fund, during an interview with Liz Claman on Countdown to the Closing Bell.
While stocks may be reaping the rewards of a Trump presidency, Gross says investors should proceed with caution.
“Yeah, record territory is always wonderful because it means prices have never been higher. But, there’s a little bubble-ish type of aspect to some of these things and I wonder,” he cautioned.
However, Gross is supportive of the President-elect’s future economic policies, some of which were detailed last week by Steve Mnuchin, Trump’s Treasury pick, during an appearance on the FOX Business Network’s Mornings With Maria. Still Gross feels some of these may be too ambitious.
“You know, his potential Treasury Secretary says that they’re looking for 4% real growth – I think it’s a 2% number or maybe a 2%-plus number. I think tax cuts will help, I think deregulation will help, I think fiscal stimulus will help — but I do think that there are negatives with anti-globalization trade types of ideas – and a strong dollar” he said.
Another red flag for Gross is the greenback.
“We know the dollar is strong, and we know that’s not a positive for exporting in terms of corporations. So, there’s one certain negative thing we’ve seen in the past few weeks, but there’s positives too.”