The US bond market underwent a brutal attack from Donald Trump winning the US presidential election. It wiped out almost $1 trillion of bond investments in a matter of one day, all shifting their loyalties to equities. The prime reason for this is Trump’s plan of investing heavily in infrastructure, rising in inflation, and protecting its country by cutting many unworkable and unworthy trade ties with many nations.
This paper analyses the article addressing the impact of Trump winning the election on the bond market, the build-up in equities, and the future performance of bond markets and inflation.
Donald Trump has been the impactor all bond investors speak about, as they continue to retrieve back their bon investments, and shift base to equity markets. Trump has announced that he will fix the declining US and invest unprecedentedly in building US infrastructure, and provide consistent employment opportunities for the local citizens. With such large investments planned, inflation is feared to come back again, prices are expected to be high again, and these reasons prompt the investor to consider equities again, though remaining costly and overly priced. The principle of the bond market is that the bond yield falls when the price rises. The investors need not worry as they are panicked right now, since consistent investments in infrastructure will automatically create a healthy debt market, indirectly supporting the bond price stability. As investments rise in all sectors, debt finance rises, including government bonds and a consistent view over this will produce a healthy bond market with better yields. Over a period of time, when the investments are execution, the bond market will be more attractive than costly equities that are unnecessarily more fluctuating than bond prices.