If Donald Trump returns to the White House, it would worsen budget deficits and the bond market would suffer more than under another term of Joe Biden, former bond investor Bill Gross said on Sunday.
In an interview with the Financial timeshe acknowledged that Biden has also overseen an explosion in US debt, with deficits rising from 4.1% in 2022 to 8.8% of GDP last year. Yet the so-called Bond King, who co-founded PIMCO, sees more trouble from the former president than from last year’s 4.1% of GDP. the current.
“Trump is the most bearish of the candidates simply because his programs advocate continued tax cuts and more expensive things,” Gross told the paper. FTand later added, “Trump’s election would be more disruptive.”
That’s because Trump has vowed to make his 2017 tax cuts permanent, while Biden has said he would let the cuts expire but not increase taxes on Americans making less than $400,000 a year.
A spokesperson for Trump’s campaign did not immediately respond to a request for comment.
As federal deficits continue to reach trillions, the Treasury Department has issued a flood of bonds. And now that the Federal Reserve is keeping interest rates high for longer and shrinking its balance sheet, this is putting pressure on bond prices. The Congressional Budget Office has projected a $1.6 trillion deficit in the 2024 budget year.
“The shortage is the culprit; a $2 trillion [annual] increase in supply. . . will put some pressure on the market,” Gross said.
He also sounded bearish on stocks, saying investors should “temper their expectations” and not assume the S&P 500 will continue to return 24% as it did last year.
“Over time, markets should return. For me, this means that prices will rise less than they are now,” he told the newspaper FT. “If people expect 10 or 15%, [they] start working with smaller budgets.”
The worsening US debt and deficit situation has raised more alarm signals on Wall Street in recent months.
In March, BlackRock CEO Larry Fink sounded the alarm, along with JPMorgan CEO Jamie Dimon and Bank of America CEO Brian Moynihan. And last month, Citadel’s Ken Griffin said the US is being “irresponsible” with its national debt.
Even Treasury Secretary Janet Yellen acknowledged Friday that the prospects for higher interest rates in the long term will make it harder to keep deficits and debt levels under control.
This story originally appeared on Fortune.com
