Donald Trump may have been elected on a populist wave, but the Janus Capital fund manager and bond whiz Bill Gross says the people who voted for him will likely experience buyer’s remorse.
In his latest investment outlook newsletter published Nov. 16, Gross announced that the “Trumpian Fox has entered the Populist Henhouse.”
While Gross proclaimed global populism “on the march” and the “wave of the future,” he squelched the idea that Trump’s impending tenure in the White House is a win for the populist agenda. He scoffed at the notion that Trump’s policies will be positive for job growth and said instead they will be “damaging” to the prospects of both jobless and low-wage American workers.
Far from making America “great again,” Gross said, “his policies of greater defense and infrastructure spending combined with lower corporate taxes to invigorate the private sector continue to favor capital versus labor, markets versus wages, and is a continuation of the status quo.”
“Not having voted for either establishment party’s candidate, I write in amazed, almost amused bewilderment at what American voters have done to themselves,” said Gross.
Gross explained that the tax reform Republicans have promised is based on the idea that American corporations are taxed at 35%, the highest corporate rate in the world. In actuality, he said, the average tax rate for the S&P 500’s 50 largest corporations is 24%—which makes them among the world’s most lightly taxed. Cutting taxes only benefits corporate profits at the expense of the workers companies employ, he said.
He also suggested that a tax holiday for US corporations—the repatriation of foreign profits with little tax penalty—would not encourage companies to ramp up investment in the American economy. “The last time such a ‘pardon’ was put into law in 2004, no noticeable pickup in investment took place,” he said. “Of the $362 billion that earned a ‘tax holiday’, most went to dividends, corporate bonuses, and stock buybacks.”
But Clinton’s policies probably wouldn’t have done much better, he says: “Both the Clinton Democrats and almost all Republicans represent the corporate status quo that favors markets versus wages; Wall Street versus Main Street,” he wrote.
Instead, Gross favors solutions such as a “Keynsian/FDR job corps or a Kennedyesque AmeriCorps” that would put Americans to work, while soothing populist sentiments at the same time.
“Global populism is the wave of the future, but it has taken a wrong turn in America,” said Gross. “There is no new Trump bull market in the offing. Be satisfied with 3-5% globally diversified returns. The Wall Street, finance-led hegemon is fading. The Populist sunrise has barely broken the horizon.”