U.S. bond yields rose sharply in response to the unforeseen Trump presidency. The experts had predicted a Trump victory with 20% odds going into election night. While the initial reaction to the Trump presidency was a plunge in stock market futures and plummeting bond yields, both markets quickly turned around with stocks soaring to all-time highs and bond yields rising. The thought behind the rise in stocks and rise in bond yields is that a Trump presidency will be pro-business and that the pro-growth initiatives by his presidency will finally stimulate the economy, increase wages and increase inflation.
However, Trump’s fiscal stimulus initiatives have yet to be articulated. Until his vision is clear, we cannot discount the potential for volatile days ahead in the market. With continued displeasure over the poor growth results of monetary policy over the last several years, tighter monetary policy may be in our future. If so, expect to see interest rates rise, but still remain attractive. President-elect Trump’s stance on foreign policy, immigration, and trade remain a wild card. Yet, his rather gracious acceptance speech put markets at ease with his emphasis being on economic growth, jobs, and infrastructure spending.
With rates rising so dramatically this week, our posture is to cautiously float rates due to what some experts see as an overreaction to an unexpected outcome.
On a separate note, on this Veteran’s Day, we want to give pause and thanks to our military.