 "Ahead of Trump presidency, global investors sell bonds and grab stocks")
Global investors have rendered their verdict on Donald J Trump as president: Sell government bonds and pile into stocks that will benefit the most from a resurgent United States economy.
From Indonesia to the United States, government bonds are undergoing a sharp sell-off as investors — large sovereign wealth funds and hedge funds, as well as the accounts of American retirees — restructure investment portfolios to try to capture the fruits of what they expect will be a free-spending Trump presidency. Across the board, the yields of these bonds, which move up as their prices decline, are pushing higher. The yield on the 10-year United States Treasury note — a benchmark for mortgages and other lending rates — has risen to 2.2 per cent from 1.5 per cent in less than two months. For such a widely held and traded security, that is an unusually abrupt move. Other safe-haven bonds have had similar reactions. The yield on Germany’s 10-year notes has gone to positive.
In just a week, it has gone to 0.35 per cent from negative 0.15 per cent.
And the Swiss 10-year is now on the cusp of paying investors to borrow money after close to two years of trading in negative interest rate territory. If the trend continues, it will signify a jarring philosophical shift from the view put forward by many prominent economists, like the former Treasury secretary Lawrence H Summers, that the global economy is destined to stagnate for some time under a regime of low growth, zero interest rates and deflation.
A series of earlier signals pointed to a move away from bonds in the weeks before the election, including higher wages in the United States and signs of increased inflation in Europe. But what has resonated deeply with countless risk-averse investors who have been camping out in government bonds for years now is Trump’s promise to have the federal government take responsibility for stimulating the economy — in the form of infrastructure investments and tax cuts — away from global central banks.
“It does not surprise me that the markets have reacted this way,” said Luciano Siracusano, chief investment strategist for WisdomTree asset management in New York. “This is a very pro-growth agenda, and we have not had that in a while.”