Bond Market

What’s Going on in the Bond Market?

1. The bond vigilantes have their knives out. Hence the big bond sell-off before Trump went back on his tariffs (all but China). 
2. Bond sell-offs mean rates go up for borrowers like companies and the US government AND the world is less eager to buy our treasuries 
3. I’m much less worried about the equity markets. They will come back at some foreseeable point. It’s the bond market that is more worrying.
4. The Bond market can change politics (anyone remember Liz Truss?) because it reflects (note I said reflects, not causes) whether the world still sees the US as the “back up currency for the world”. 
5. If the world doesn’t buy our US treasuries that means our government cannot keep borrowing to pay its debts. Then we have a real problem.

Bottom line: 

1. Trump cannot control the US market. If anything, he’s chastened by it. He just got spooked and backed off his retaliatory tariffs (all but China). 
2. Don’t worry about equities, they will come back. Hold tight.
3. Watch the bond market, because the real worry would be if the world doesn’t seek refuge in US treasuries. 
4. BONUS:Watch for Jay Powell (fellow deadhead) to stay in place and continue the independence of the Fed.

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All my best,

Lori Atwood

Founder

Fearless Finance