Trust the Bond Market Before Stocks on Economy, PGIM's Hunt Says

(Bloomberg) -- Bond and stock prices are sending different messages about the prospects for U.S. growth under President Donald Trump, and investors would be smart to take the signal from fixed-income markets, said David Hunt, chief executive officer of Prudential Financial Inc.’s $1 trillion asset manager PGIM.

“Our belief is very much that growth probably can’t return to the numbers that the administration has put forth,” Hunt said Monday in an interview on Bloomberg Television.

Stocks are trading near record highs after surging on the surprise election of Trump, who campaigned with a vow to reduce regulation, cut taxes and boost infrastructure spending to help achieve 3 percent growth of U.S. gross domestic product. While the yield on the 10-year Treasury surged in the weeks after the November election, it is now just about 2.32 percent, less than on Dec. 31.

“At the moment, you’ve got markets a little bit at war with themselves, they’re sending off different messages,” Hunt said.

When asked which signal was best, he said the annual growth rate will probably be closer to 2 percent than 3 percent. Investors need to be realistic about how demographic trends and the slower pace of productivity growth will limit economic expansion, according to Hunt.

“No real amount of infrastructure spending or tax plan is going to change the fundamentals of our labor markets,” he said. “We’re doing fine, there’s no reason to be discouraged. But we don’t think that the expectations the administration has set out are realistic.”

To contact the reporter on this story: Katherine Chiglinsky in New York at kchiglinsky@bloomberg.net.

To contact the editors responsible for this story: Dan Kraut at dkraut2@bloomberg.net, Dan Reichl