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Bill Gross speaks in Chicago in 2011.Tim Boyle/Bloomberg

Legendary bond fund manager Bill Gross says the recent Trump-fuelled rally in U.S. equities has gone too far and suggests that investors take a breather.

Stocks have soared since Donald Trump was elected U.S. president, with the major American indexes reaching record highs on Black Friday before ending last week close to flat. Traders rushed to reprice stocks for higher outlooks for inflation, the U.S. dollar and economic growth, outcomes which are widely expected if the incoming administration begins to fulfill Mr. Trump's campaign promises.

Fund managers have been rotating into equities and out of bonds, as yields on Treasuries surged and prices fell. Last week capped off the largest four-week equity inflows in two years and the largest five-week fixed-income outflows in over three years, according to a Bank of America Merrill Lynch research note published Friday.

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But Mr. Gross, who joined Denver-based money manager Janus Capital Group Inc. two years ago, insists those campaign promises for growth are too good to be true and says now is a good time for equity investors to take some profits and hold a little more cash in their portfolios.

"The market has gone up too much on the enthusiasm of Trump policies," he said in an interview. "Let's take a bloom off the rose here and not get too greedy."

He thinks slashing the corporate tax rate to 15 per cent from 35 per cent is nothing more than a "handout" that won't spur investment, and is adamant that the U.S. economy expanding at an annual pace of 3 per cent to 4 per cent growth "is just not going to happen."

"I think the U.S. will be lucky to hit 2 [per cent] and that sort of applies to Canada, too," he added. That is because of what he calls "structural headwinds" such as aging demographics, high debt loads and the displacement of labour due to technology, a process that he says hasn't created the same number of jobs with the same pay or better.

Mr. Gross's comments come as the man once dubbed the "bond king" is starting to manage a new fixed-income fund on behalf of National Bank Investments Inc., marking the first time Canadian retail investors can access one of his portfolios in Canadian-dollar terms and without any foreign-exchange risk.

A minimum of $500 is needed to invest in the NBI Unconstrained Fixed Income Fund, which made its debut last month. So far, Mr. Gross says he has $200-million invested in Canadian commercial paper, yielding about 75 basis points (a basis point is 1/100 of a percentage point).

But his plan is to scour the globe during the next couple of weeks for securities that will deliver a targeted return of 5 per cent a year, while mimicking the steadiness of a money-market fund. "That's really hard to do," Mr. Gross added, "but at Janus for the last two years, that's what I have done."

His Janus fund has returned 4.6 per cent this year and has grown to $1.7-billion (U.S.) in net assets from $9-million when he took over the fund in late 2014, propelled by an initial personal investment by Mr. Gross of more than $700-million.

In the Canadian-dollar NBI fund, Mr. Gross will hold fixed-income securities from around the world that have various maturities and credit ratings, the fund's prospectus states. It will also include a mixture of other asset classes such as common and preferred shares, mortgage-backed securities and derivatives. Up to 25 per cent of the NBI fund can be invested in high-yield bonds.

"It's a $200-million [Canadian] account at the moment and my goodness, that is a nice cheque of confidence," he said. "We are putting that to work for them."

Mr. Gross was born in Ohio but his roots are in Canada. His parents were from Winnipeg and he says he considers himself "a Canadian guy, at least to a certain extent."

"I don't say 'eh' but I love hockey," Mr. Gross said with a chuckle. "I really like Canada."

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