Wall Street Maps Out What a Trump Victory Would Mean for Bonds
How are Goldman Sachs and Morgan Stanley positioning for the election?
Goldman Sachs and Morgan Stanley are taking a fresh look at how a Donald Trump victory in November could play out in the bond market1. Morgan Stanley strategists argue that "now is the time" to wager on long-term interest rates rising relative to short-term ones. Meanwhile, Barclays suggests the best response to a Trump victory is to hedge against inflation.
Why are bond yields rising post the presidential debate?
Bond yields are rising post the presidential debate due to the increasing likelihood of a Donald Trump victory in November. Wall Street strategists are advising clients to prepare for sticky inflation and higher long-term bond yields, as Trump's economic policies may lead to more rate cuts from the Federal Reserve and fiscal expansion, pressuring longer-term bond yields higher4.
What strategies are Barclays recommending for inflation hedging?
Barclays recommends hedging against inflation as the best response to a potential Trump victory. Strategists Michael Pond and Jonathan Hill suggest that the clearest expression of this strategy is investing in five-year Treasury Inflation-Protected Securities (TIPS) to outperform standard five-year notes.