Equity markets can’t ignore rising bond yields in US: Chris Wood
bond yields in the wake of the election of Donald Trump as the US President.
He said the other negative for equities is that the liquidity situation has begun to deteriorate at a time when valuations are at historic highs.
«What seems clear is that the new president is likely to confront at some point negative bond market sentiment in the face of America's deteriorating fiscal fundamentals,» said Wood in his newsletter Greed & Fear.
Yield on 10-year US Treasury has risen to 4.31%, from 3.6% in mid-September, ahead of the elections as Trump's pre-election promises such as higher import tariffs and reduction in taxes are expected to drive up the economy's debt. Bond yields and prices move in opposite directions — when yields rise, prices fall and vice versa.
Wood said the case for remaining bearish on Treasury bonds is straightforward, while Trump's policy agenda is long-term bearish for the dollar, though the initial pro-growth orientation will be positive for the currency.
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