Billionaire investor Bill Gross is skeptical that the post-election Trump rally is here to stay.
In his latest monthly investment outlook, the bond guru warned that while the President-elect's business-friendly stance on regulations and taxes has helped push stocks to record highs in recent weeks, his protectionist instincts could prove harmful in the long run.
"There’s no doubt that many aspects of Trump’s agenda are good for stocks and bad for bonds near term – tax cuts, deregulation, fiscal stimulus, etc," noted Gross in his outlook published on Tuesday.
However, as he goes on to note, "longer term, investors must consider the negatives of Trump’s anti-globalization ideas which may restrict trade and negatively affect corporate profits," wrote Gross.
The strong dollar also continues to be a headwind for companies that do a significant portion of their business abroad, as Gross points out, and has weighed on Corporate America's bottom line.
The famed investor, who manages the $1.7 billion Janus Global Unconstrained Bond Fund, has long been critical of the Federal Reserve and its decision to keep rates low for so long. Lately, he's taken to criticizing Trump and the efficacy of his stated policies.
For instance, in his outlook, he took a jab at some of the lingo that's been thrown around in the wake of the fellow billionaire's election that sounds nice but fails to capture the whole equation.
"Begin to emphasize 'fiscal' as opposed to 'monetary' policy, but never mention Keynes or significant increases in government deficit spending," wrote Gross. "Use the buzzwords of 'infrastructure' spending and 'lower taxes.' Everyone wants those potholes fixed, don’t they? Everyone wants lower taxes too!"
Gross has previously said he didn't vote for either major party candidate in the election.
In light of the stock market downturn that Gross is expecting, he recommends investors increase their cash allocations and set bond durations below benchmark targets in anticipation of higher rates.
Gross also took the opportunity to compare the nation's global debt crisis with the nation's high incarceration rate. In both scenarios, he says, there's a certain imprisonment. There's also no quick solution.
"On TV, 'Orange Is the New Black' yet, in the markets, 'Red' (in some cases) may be the new 'Green' when applied to future investment returns," wrote Gross. "Be careful – stay out of jail."