'Bond King' Bill Gross: "Trump is a Bigger Market Risk than Biden"

Bill Gross, co-founder of the global bond management firm PIMCO and known on Wall Street as the "Bond King," predicted that if former President Donald Trump wins the presidential election this November, the bond market will face greater turmoil compared to President Joe Biden’s re-election. He diagnosed that Trump’s tax cut policies would further exacerbate the U.S. fiscal deficit problem, acting as a negative factor for the market.

According to major foreign media on the 26th (local time), Gross stated, "Former President Trump advocates continuous tax cuts and policies involving significant fiscal spending," adding that Trump is "more bearish" among the presidential candidates, including current President Joe Biden.

While attributing the recent surge in the U.S. fiscal deficit to President Biden, he warned, "Trump’s election would cause greater turmoil." Last year, the U.S. fiscal deficit was about 8.8% of the Gross Domestic Product (GDP), a significant increase from 4.1% the previous year. The massive fiscal deficit is considered one of the factors that increase federal government interest expenses, depreciate the currency value, and sharply raise bond yields.

Earlier, Republican presidential candidate Trump announced an economic pledge to make permanent the corporate tax cuts passed in 2017 if he returns to the White House. The bipartisan think tank, the Committee for a Responsible Federal Budget (CRFB), projected that this would cost $4 trillion over the next decade. Gross expressed concern, saying, "The problem is the deficit," and warned that "an increase in supply of more than $2 trillion annually will put pressure on the market." Jamie Dimon, CEO of JPMorgan Chase, and David Solomon, CEO of Goldman Sachs?both known as "emperors of Wall Street"?have also expressed strong concerns about the rapidly increasing U.S. fiscal deficit.

In particular, Gross’s remarks contrast with Trump’s repeated claims ahead of the election that he manages the economy and financial markets better than President Biden. Major foreign media assessed that Gross’s comments, coming less than six months before the November election, are weakening Trump’s campaign message that "I am better for the economy."

The surge in the U.S. fiscal deficit is also the background for Gross’s recent declaration to discontinue the "Total Return" bond management strategy that brought him fame. Earlier this month, in a report titled "They Just Want to Sell You Bond Funds," Gross declared, "Total Return is dead." The Total Return strategy actively took positions on duration (investment recovery period), credit risk, and volatility to aggressively pursue gains from rising bond prices.

On the same day, Gross also expressed a relatively pessimistic outlook on the U.S. stock market. He cautioned investors not to expect the S&P 500 index, which surged 24% last year, to show a similar rise this year, stating, "Expectations need to be tempered." He said, "Over time, the market can revert," and added, "If people expect 10-15%, they should operate with a budget less than that." So far this year, the S&P 500 index has risen by about 11% as of the closing price on the 24th.