Bill Gross: we’re stuck in a 2% real GDP world
While a good number of market veterans have begun predicting that Trumpian policies and pro-business executive actions are going to boost real growth in the US to 3% or 4%, there are others who remain skeptical of the extent to which this could happen.
Bill Gross, for example, who manages over $190.9 billion in assets at Janus Capital (JNS), believes real growth is anchored at the 2% level. “We’re stuck in a 2% real GDP world, no matter what the fiscal stimulation, and what the deregulation,” said Bill Gross at a Bloomberg Surveillance interview recently.
A strong fiscal program could boost growth
Bill Gross does not assume continuing dollar strength unless the Fed stays ahead of the European Central Bank and the Bank of Japan. And at the moment, that’s not the case. Both of these central banks are still stuck on accommodative monetary policies and in significant proportions. This, Gross believes, is what has led to the dollar (UUP) rally and growth in the US.
He doesn’t totally negate the view that Trump’s economic actions would positively impact growth in the US. For Gross, if the US does have a strong fiscal program in place, perhaps $1 trillion to $2 trillion over the next 10 years, that could indeed lead to an incremental 0.5% real GDP growth for the next several years. And, with corporate taxes being cut, there is the potential of a near-term stimulus.
Gross would still go with 3% as the possible real growth rate that the US economy could reach, provided the Trump stimulus is executed as expected. This would be positive for the stock market (SPY) (IWM) (QQQ), bond (BND) yields, and inflation (TIP).