Two big investors have called into question the prevailing wisdom that Donald Trump’s election will be good for global growth.
One is billionaire George Soros, who, having successfully foreshadowed the global financial crisis, has continued to emerge as one of the more pessimistic market commentators of the past decade.
The other is Jack Bogle, founder of the Vanguard Group, which is one of the world’s largest investment managers.
Both men share concerns about President Trump’s pledges to cut taxes, lighten regulation and boost infrastructure spending, which, although stimulative measures, remain shrouded in uncertainty and could, in some instances, appear contradictory, they say.
Uncertainty the “the enemy”
The harshest words came from the chairman of Soros Fund Management, who has previously described the president as an imposter, con man or would-be dictator. “Markets see Trump dismantling regulations and reducing taxes … their dream has come true,” Soros said during an interview conducted by Bloomberg at the World Economic Forum in Davos, Switzerland.
“Right now, the answer is at a peak … it’s impossible to predict exactly how Trump is going to act because he hasn’t actually thought it through; he didn’t expect to win.”
Soros said he expected Trump to fail, and not just because people like himself wanted that to happen. “The ideas that guide him are inherently self-contradictory and the contradictions are actually already embodied by his advisors—he’s got three chiefs of staff instead of one—and inside his Cabinet.”
Uncertainty is the enemy of long-term investment, Soros said. “So I don’t think the markets are going to do very well.”
Short-term gain, long-term …?
Bogle, meanwhile, said that while Trump’s policy pronouncements may be good for the markets in the short-term, they could cause problems down the track.
His pledge—for example, to spend $1 trillion on infrastructure—would mean a lot of deficit financing, Bogle claimed. “His long-term policies, I’m afraid, are bad for society, bad for the economy and bad for the markets.”
Any widening of the gap between rich and poor, increased racial tensions, a disintegration of cross-border trade relationships and less support for NATO in Europe would spell bad new for investors, Bogle said.
For the most part, though, CEOs are generally optimistic about what Trump’s view could mean for business. JPMorgan Chase CEO Jamie Dimon said in Davos that the U.S. economy could grow by up to 4% this year if Trump can successfully pursue the right tax and regulatory changes. “We need tax reform,” Dimon said. “We’ve been driving capital and brains overseas for eight years. Tax reform, repatriation, will bring capital back here and plants back here.”