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Market Extra: Bond guru Bill Gross has a theory about what’s holding back productivity growth

In his latest investment outlook, legendary bond investor Bill Gross tackles “the investment question of the hour/day/decade”: Can the Trump agenda deliver 3% economic growth? And if so, what would the implications be for the financial markets?

High-yield bonds and other risk assets would almost certainly do well, Gross says, as 3% growth would cause the levered rate of corporate revenue and profit to increase, leading to more favorable price to earnings ratios. It might also trigger a genuine bear market in the investment-grade debt, which would drive up borrowing costs. Read the outlook here.

Gross’s analysis suggests that, in this scenario, the impact on financial markets would be easy to predict.

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