Love him or hate him, Donald Trump is the President of the United States.
During the election campaign he made sexist, racist and discriminatory remarks in an attempt to get different sections of the American voting public onside.
His trademark “off-the-cuff” mass-communication style has made him relatable and extraordinarily popular.
But his main goal, right from his first election speech, has been to “make America great again”.
That means more jobs, tax cuts for corporate America, tighter borders, and better trade deals.
So is he succeeding? Is he actually “delivering the goods” to his voters?
What if I told you a very wealthy, powerful collection of people are already starting to make up their minds about Donald Trump?
The crash in the Mexican peso predicted the Trump presidency weeks before the election. Now, however, it’s the bond market (and the peso to a degree) that is predicting how long Mr Trump may last in the top job.
Bond market
Ok, very briefly, because I’m likely to lose you if you’re not even vaguely interested in the bond market … but bonds are IOUs. You pay money and receive a piece of paper, with the promise that you’ll receive an income stream (interest payments) while you hold that piece of paper.
The piece of paper is like an investment property, and the interest payments are the equivalent of rent.
The bond itself is what’s called a “debt security”. If you own a bond, you want the price of the bond to rise. Just like any other asset.
If you’re looking to buy a bond, you’ll hold out for a high interest rate.
That makes for an inverse relationship between the bond price and the yield. Confused? You’re in very good company!
I only highlight that because I bring that concept up a little later in the piece. You don’t really need to know why the yield and price move in opposite directions, but they do.
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