Friday, November 11, 2016

After the US election

I think the bond selloff was one of the most important event. I believe the election was just a catalyst of accelerating something that started somewhere in early October. There was simple too much talk about helicopter money and fiscal stimulus. I don't have doubts that Trump will go on this path. Therefore, I'm bearish on bonds over longer term, I will look to sell pullbacks.

Front end Yields changed little, whereas significant moves on the back end. We see this not only in the US but to some extent in the Eurozone as well. If this is to continue the financial sector (as it is a highly leveraged position in term mismatch) could rally significantly.

A re-balancing is going on to traditional sectors that could benefit somewhat more from any fiscal stimulus. SPY-QQQ spread could be an interesting trade on longer term.

Healthcare rally reflects the expectations on relaxed potential drug price regulations. Utilities were the worst performers since they acted as a bond substitutes.

USD and GOLD: honestly, its difficult to read any potential longer term implications from recent price moves. The USD Index is sideways on the weekly chart from March 2015. If I should bet which way it could break out I would say the upside is more likely. More budget deficit could force FED to be less accommodative, this could boost the rate differential trades. But, I would leave this for the economists.

No comments:

Post a Comment