Pimco Germany Boss: Trump Will Not Boost Productivity

  • Why it matters

    Why it matters

    A leading fund manager says Donald Trump’s pro-cyclical interventions may extend the current boom, but cannot counteract fundamentals such as low productivity growth.

  • Facts


    • Since taking office, Donald Trump has cancelled the TPP Pacific trade agreement, and has made aggressive statements on trade with China, Mexico, and Germany.
    • Mr. Trump plans to radically simplify the U.S. tax system, cutting corporate and individual taxes, and allowing U.S. firms to repatriate cash held overseas.
    • This week, the U.S. Federal Reserve raised interest rates a quarter-point, with strong indications of further rate rises later in 2017.
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Andrew Bosomworth, head of portfolio management at Pimco Germany, has told Handelsblatt that he does not foresee increases in U.S. interest rates beyond 2018. In a wide-ranging interview, he said he was skeptical about Donald Trump’s capacity to bring large-scale growth to the U.S. economy. It was possible that the current boom could be prolonged by a year or two, he said, but genuine increases in productivity seemed less likely.

Mr. Bosomworth, a native of New Zealand, joined the investment management firm Pimco in 2001. Pimco, headquartered in California, has around $1.5 trillion in assets under its management around the world, and is regarded as particularly strong on economic analysis. Mr. Bosomworth and his team in Germany manage around €280 billion, or $300 billion worth of assets.

Commenting on the Federal Reserve’s decision to increase base rates by one-quarter of a percentage point, Mr. Bosomworth said he did not foresee a prolonged upswing in rates. “We figure there’ll be a total of three quarter-point increases in 2017, but not much going beyond 2018.” Although some observers foresaw a continuing economic boom, Mr. Bosomworth pointed out that we were already experiencing the third-longest expansion in the post-war era. Any falling-off in growth would limit the Fed’s capacity to push up rates.

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