Trump is back in power after his inauguration overnight. US government bond yields fell to finish the day at 4.582% after he delayed a tariff announcement on China, but announced potential 25% tariffs on Mexico and Canada. The Mexican peso and Canadian dollar fell sharply against the US dollar. Broadly, economists expect inflation will rise over the next couple of years due to Trump policies.
Two contributors are cautioning against duration, that is, investing in long dated fixed rate bonds. Benoit Anne from MFS Investment Management outlines his expectation for a major macro regime transition as Trump takes the helm in his ‘From Goldilocks to Trumpilocks’ article, while Tim Murray from T. Rowe Price warns against inflation and duration.
Betashares CRED ETF, a fixed rate corporate bond ETF, reached a milestone $1 billion invested and MA Financial has launched a credit income trust.
Higher interest rates are good for bond investors. Chris Iggo from AXA Investment Managers has written a very good article and explains why high yields on offer bode well for the coming year.
Good data is bad for risk assets. A strong US employment report earlier this month triggered a sharp risk-off move says Benoit Anne, in a second insightful article. He argues investors are addicted to rate cuts and unexpected data forces a rethink on interest rates.
Catherine Braganza from Insight Investment, has written an excellent article explaining the attractiveness of high yield bonds and the rewards of compounding.
Trump’s emphatic win will lead to some big moves and coupled with an upcoming Australian election, it is going to be an interesting year.
Have a good week!
