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Bonds Need The Deets
Stocks may have a bond problem.
Let's take a quick step back. On the eve of the Fed's September meeting, 10s were 3.63%. 75bps of rate cuts, one election and two months later, they're 4.43%.
Is that a "harrowing" selloff? Not really, no. But it's meaningful and equities struggled with it a bit last week.
The figure below, updated with the latest estimates from the NY Fed's model, is a reminder that behind the October 2024 "Trump trade" in Treasurys was a re-run of the late-summer/early-autumn
echos … primarily a bond guy, I’ve not jumped in post election w/ higher rates (sporadic munis only) – even way smarter people than me (as your post highlights) can’t find a clear bead to follow – we’re in the dark, and bond people do not like darkness, … our shadows can bother us … in my experience.
I suspect the stimulative effects will be less than folks imagine. Tariffs are a consumption tax for one thing, and extending the 2017 cuts is only keeping in place what’s already there. If spending growth slows because of discretionary cutbacks vs cutting corporate taxes and top rates I think you are looking at a wash. The big change will be income distribution. Surprise! Trump’s voters are going to get a punch in the face.
We got that last time. The cap on S&L tax deductions cost me 10k. My taxes went up 2 pp under Trump 1.0.
I’m willing to bet the tight margin in the house results in the SALT limits being repealed or increased. A lot of reps in NY and CA that want to see that removed, but that’ll be a big tax cut for me as well if that gets repealed. Then again, Republicans are more than happy to inflict maximum punishment on blue states and that’s one of the most effective ways to do it.
If you’re worried about the bond market, consider valuations for a minute. PEs, boiled down, are nothing more than a measure of future confidence. Confidence in what now ? A narcissistic, psychotic, “moron”, with a football and no cohesive plan, except maybe self aggrandizement. Transactional squared.
I hope I am as wrong about this as I was about the election, but cash and puts are looking better and better.
Not sure why more clarity is needed. Pretty clear that govt spending will continue unabated, and reductions in budget through “efficiency” will be more than offset in tax cuts even beyond just renewing trumps tax giveaway to the rich. My taxes went up significantly with the SALT limitation. I don’t see blue states getting that revoked based on his revenge pledge.