Posted on 03/06/2025 7:30:41 AM PST by Miami Rebel
U.S. Treasuries are now outperforming stocks since Donald Trump was elected President, and some strategists say there’s room for those gains to run.
A Bloomberg gauge of U.S. sovereign debt has returned 2.1 per cent since the Nov. 5 vote, beating a gain of 1.6 per cent from the S&P 500 index including reinvested dividends. While long-end Treasuries declined on Tuesday after Trump imposed new 25 per cent trade tariffs on Canada and Mexico, the prospect of further Federal Reserve interest-rate cuts is seen giving bonds a further tailwind.
Stocks meanwhile are being sold, as the outlook for global growth worsens and also due to concern market leaders such as Nvidia Corp. are overvalued. Taken together these moves are the opposite of the so-called “Trump trade,” which favours rising equities and higher treasury yields.
“It’s easy to see the Fed cutting 50, 100, 150 basis points this year, but tough, if not impossible, to see them tightening by the same magnitude,” said Michael Brown, senior research strategist at Pepperstone Group Ltd. in London. “Sprinkle a growth scare on top, and there’s your bull case in a nutshell” for bonds, he said.
Treasury 10-year yields fell to a four-month low of 4.11 per cent Tuesday before erasing the move and edging higher. The U.S. economy, long lauded for its outperformance, is showing cracks, with factory activity edging closer to stagnation in February — bolstering the appeal of fixed-income assets.
“The ‘U.S. exceptionalism’ narrative — a driver of macro markets for well over a year — faces an increasingly uphill battle, given risks to growth on both sides of the Atlantic,” Morgan Stanley strategists including Matthew Hornbach wrote in a note. “We think U.S. Treasuries will benefit the most from a rethink of the narrative.”
Yesterday, a single trader appears to have sold 78,000 contracts of benchmark June Treasury 10-year futures on Tuesday morning, London time — equivalent to a $5 million bet on each basis point change in the 10-year yield.
This the biggest single Treasury trade since 2013! So far it's up about $35 million.
The only stock holding I own which is doing great is T, which tends to be defensive and not reliant on economic growth.(Plus it reported great earnings a couple weeks ago.)
The good news on the markets is that we're not seeing a widening of credit spreads, which means that thus far there's no serious concern about defaults due to economic weakness.
Not a relevant duration.
Ah, one of our daily ‘news reports’ pushed by the low-rent media against the Trumpster. Give it the (dis)regard that it deserves.
Remember Buffett and others have been selling. They must know something. Or they think they do.
I can tell you that foreign sovereign funds are swamping the US market. Thats far more money than even our market can handle. Its also throwing land values up. Especially real estate.
Not surprised as the New MAGA Order is causing massive displacement of money flows.
Once the dust settles, and investors realize that the Trump and MAGA approach is “the way things ought to be” (!), the equity markets will rally, and strongly.
IMHO. My two kroons.
The Market is choppy right now.
“The Market is choppy right now.”
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That’s putting it mildly. Things will improve as Trump’s agenda gets implemented and real results happen - peace in Ukraine, deportation gets in full swing, Govco layoffs and efficiencies start lowering the deficit, interest rates come down, etc. It may take a few months.
on the bright side, Nancy Pelosi has lost a good deal of money in the markets recently. she’s been holding a good deals of chip stocks as of last month.
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