While in previous monthly letters and public statements, Bill Gross has expressed a negative view of Donald Trump, warning his tenure would be damaging, and urging investors to move to cash, culminating most recently in a Bloomberg interview in which he compared the president-elect's policies to those of Italy's fascist dictator Benito Mussolini, in his latest monthly investment outlook he takes a more practical view of what Trump's policies would mean for markets, and specifically the one variable he believes is the key for market action going forward. Specifically, he is focusing on what he thinks is the critical resistance level of the 10Y yield, which will set the tone for virtually every other asset class, from stocks, to FX and, of course, to rates.

But before he goes into that, he points out a tangent on the difference between secular stagnation and actual growth, which he notes is the difference between 2% growth and 3% growth and defines it as“critical” namely that “3% growth rates historically have propelled corporate profits to a somewhat higher clip because of financial and operating leverage dependent on higher growth. 2% or less typically has smothered corporate profits”

How does this fit into markets? "The critical question of interest rates and the future level of the 10-year Treasury is challenging" noting that “It is the key to interest rate levels and perhaps stock price levels in 2017” and then segues into what he dubs his "only forecast for the 10-year in 2017." To wit:

If 2.60% is broken on the upside – if yields move higher than 2.60% – a secular bear bond market has begun. Watch the 2.6% level. Much more important than Dow 20,000. Much more important than $60-a-barrel oil. Much more important that the Dollar/Euro parity at 1.00. It is the key to interest rate levels and perhaps stock price levels in 2017.

Which, incidentally reminds us of an article we wrote back in November asking "How Far Can Bond Yields Rise Before Hurting Equities", and the answer, not surprisingly was just around 2.60%

That said he remains skeptical: “Trump’s policies may grant a temporary acceleration over the next few years, but a 2% longer term standard is likely in place that will stunt corporate profit growth and slow down risk asset appreciation.”