Obviously a horrible day for Long-term Bond Bulls (i.e. US growth bears) … but is that for the reason everyone in the manic media is citing (i.e. inflation)? Gotta trust that establishment media!
Three things on that:
- When the ramp in yields started this am, it was on Dollar Down (now USD is up on the day – this isn’t GBP Brexit)
- Trump Policy would be inflationary if it was Bernanke style money printing (Dollar Bearish); it’s not, yet
- 5yr fwd break-evens (chart attached) are at a whopping 1.59%; the TREND there remains obviously bearish
So it’s not inflation. I think it’s more of a short-term growth scare. A growth TREND is what would get me to change my mind on bond yields (like when we went bearish on bonds with US #GrowthAccelerating in 2013).
But a growth scare (TRADE duration) isn’t a TREND either. We’re at +0.5% and -0.7% q/q GDP for this quarter and next. If the predictive tracking algo changes, we will. But it certainly hasn’t yet.
On the “Trump could be like Reagan” meme about “growth”, don’t forget from his election day in 1980 to the 1982 US Recession lows (AUG), the SP500 crashed -22%. So on that score, Trump better be you-gely better than Reagan!
KM
