Bill Gross says stock market 'priced for too much hope'

• The bond guru says a global slowdown in productivity gives President Trump's agenda little chance at getting economic growth above 3 percent.
• Says "all asset prices elevated to artificial levels."
• Populist agendas like Trump's could make productivity problem worse, Gross says.

Bond investor Bill Gross warns a global slowdown in productivity as a result of the financial crisis will make it impossible for President Donald Trump to get economic growth back above 3 percent and will reveal financial markets as overvalued.

"Equity markets are priced for too much hope, high yield bond markets for too much growth, and all asset prices elevated to artificial levels that only a model driven, historically biased investor would believe could lead to returns resembling the past six years, or the decades predating Lehman," wrote the Janus portfolio manager in his monthly investment outlook. "High rates of growth, and the productivity that drives it, are likely distant memories from a bygone era."

Economists including Federal Reserve Chair Janet Yellen seem puzzled as to why productivity over the last five years has averaged just 0.5 percent, when it totaled 2-percent-plus before the financial crisis, Gross said. The answer was made pretty clear to Gross, however, in a report from the International Monetary Fund (IMF).

"Slowing business investment/trade and an ongoing level of low to negative interest rates have resulted in a misallocation of capital to low-risk projects and a slowdown in small business creation. Longer-term secular demographic factors such as an aging population also play a significant part since older consumers consume less of almost everything except health care," Gross' outlook states, in reference to the IMF report.

Gross also implies President Trump's agenda and other populist movements popping up around the world — with tenets like higher tariffs and curbs on immigration — could make the productivity slowdown worse.

The is up 13 percent over the last year and more than 4 percent so far this year, although the market has tread water the last two months on concerns over valuation. The iShares High Yield Corporate Bond ETF, which tracks the junk bond market referenced by Gross, is up 6 percent over the last 12 months, but is little changed this year.