Bonds Set to Snap Three-Decade Winning Streak as Fed, Trump Plot Next Moves
Bond funds have provided investors with years, even decades of growth. Is that streak coming to an end with the rally inspired by President-elect Donald Trump?
Saint Louis, MO, USA – March 11, 2016: Donald Trump talks to supporters at the Peabody Opera House in Downtown Saint Louis.
Much of that rally has come via aggressive Federal Reserve bond buying through quantitative easing, but the dynamic is changing. The Fed is poised to hike rates, while a boost of fiscal stimulus appears to be in the cards—all of which points to rising bond yields.
Since Trump won the election on November 8, interest rates have increased, calling into question the three-decade-old bull market in fixed income.
Economists widely expect tax reform from President-elect Trump and the GOP-led Congress that could see lower income and corporate tax rates.
Simultaneously, stock markets have surged to new record highs, a factor that may also weigh on bond prices as investors ramp up their appetite for risk-sensitive assets.
Higher interest rates are affecting mortgages too, rising on average above 4% on a 30-year fixed. Recent data suggests it could undermine the housing market.