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Pimco, one of the world’s biggest bond fund managers, has warned that US president-elect Donald Trump’s economic plans could lead to the economy “overheating” and could halt interest rate cuts, posing a danger for stocks that shot up in the wake of his presidential election victory.
Dan Ivascyn, chief investment officer at Pimco, said US equity markets could suffer a reversal after rising sharply on the Republican candidate’s emphatic win. The S&P and Nasdaq Composite indices both surged to fresh record highs this week in anticipation of tax cuts, looser regulation and trade tariffs.
But such “reflationary” policies, in a US economy that already has “a lot of momentum”, have the potential to feed through into inflation, he warned.
“It’s not as simple and easy as just a one-way reflationary…
