Can someone help me decipher this Bloomberg view

[Mike 03]

The other morning on Bloomberg radio, guests and hosts were discussing the second Trump term. They generally agreed on the idea that, and I'm recalling it from memory and it may not be precise:

The first Trump term was defined by the performance of the stock market; the second Trump term will be defined by the bond market.

Is there a tip for investors hidden in this notion, or is it more a reflection of what the Federal Reserve is anticipated to do with interest rates?

Also: Does this makes sense to you? Do you agree, disagree, or have any other views about this you could share?

Thanks in advance for any opinions on this.

[bucolic_frolic]

1. I think it's more a statement about inflation going forwardq

T Bond yields are already rising as the Fed cuts interest rates. THAT's not going to continue.

[Joinfortmill]

2. Here's an article from NPR

https://www.npr.org/2024/11/14/nx-s1-5186956/trump-election-bond-stocks-investors

'Trump's economic agenda faces a big potential foe: The bond vigilantes'

'Bond prices have dropped sharply since Trump's election as investors worry that his economic policies will reignite inflation and lead to surging fiscal deficits. And that matters...
The U.S. bond market is the biggest in the world, and all kinds of interest rates are tied to how the market performs. When bonds drop, it can hurt the U.S. by making it much more expensive for the government to borrow money. And it affects regular Americans, too, by jacking up the cost of loans, from mortgages to car payments. A lot of people also hold bonds in their investment or retirement portfolios so they could face potential losses...

That gives bond investors big influence — and they can use to it to try to hold governments accountable and force them to reverse their economic policies. The market even has a term for investors who exert pressure in this manner: bond vigilantes....

Changes in bond prices affect the interest due on that bond. It's a simple rule: Bond prices and yields move opposite from each other. When bond prices rise, their yields fall, meaning investors are happy to accept lower interest payments..Changes in bond prices affect the interest due on that bond. It's a simple rule: Bond prices and yields move opposite from each other. When bond prices rise, their yields fall, meaning investors are happy to accept lower interest payments. But when bond prices fall, their yields rise, since investors demand more interest as compensation.'

[IbogaProject]

3. Bonds go up when interest rates decline

We are in an "easing" of interest rates phase now. But if Mr Tmp pulls any amount of his team's harebrained plans the US Treasury Bond market may react badly. If those bond interest rates go up if the market perceives risk the bond prices would fall. If inflation goes down and government borrowing and debt service (interest payments) remain consistent than bond prices will improve. If any thing causes market unease or if actions cause inflation or debt default those will decrease bond prices.

[nmmi]

4. I don't know, but most interest rates have RISEN since the Fed's cuts

The Fed cut rates on Sept 18 by 0.50 percentage points and on Nov 7 by 0.25 percentage points. These are very short term rates - overnight rates that banks lend to each other. That generally affects longer short-term rates, and even intermediate term rates.

But, surprisingly, since Sept 18, the 10 year Treasury yield has risen from 3.74% to 4.41% (and bonds have fallen in value accordingly.).

And, by the way, the yield was 4.43% at the 11/5 election day close, before the election night results Nakba began to unfold, so it's actually a drop (teeny one) since pre-election.

Even the 1 year yield has risen from 3.97% to 4.41%

Its only short term yields that have fallen (and their corresponding securities' prices risen), e.g. the 3 month Treaury yield has fallen from 4.73% to 4.54%.

The average rate on a 30-year mortgage in the US rises to highest level since July, AP, 11/21/24
https://apnews.com/article/mortgage-rates-housing-interest-financing-home-loan-99fa3ab40bf2ad2cad1e554683e70d54

Treasury rates (graphs):
10 Year: https://www.cnbc.com/quotes/US10Y
1 Year: https://www.cnbc.com/quotes/US1Y
3 month: https://www.cnbc.com/quotes/US3m

Kiplinger's explains this counterintuitive phenomenon by saying the economy is stronger than what was anticipated a couple months ago (which tends to push up yields), and there's been a bit of an upturn in inflation too, after months of falling.

People who own intermediate term bonds (like me) or longer term, or even as low as 1 year maturity have seen their bond values slaughtered. I was so hopeful that the bleeding would stop with the rate cuts, but no, the blood is gushing out even faster.

I don't know who the "bond vigilantes" are, but I feel like I've been "vigilanteed".

We'll have more of the same if the tariff fuckheads cause inflation to reheat. (Or the opposite if they screw the economy up enough to cause a real recession).

Edited to add: I just saw this in Latest Breaking News:
Dozens of retailers jacked up interest rates on store cards ahead of Fed cuts, NBC News/CNBC, 11/22/24
https://www.democraticunderground.com/10143345033
It's about all the retailers raising store card interest rates BEFORE the Fed began rate cuts. Although there is this little bitty thing in the long article about after the first Fed rate cut:

Some retailers, such as Macy’s, Nordstrom and TJX, have since passed on the 0.5 percentage point cut that the Federal Reserve implemented in September to cardholders. Still, their APRs are at record highs, sitting between 2 and 2.25 percentage points higher than they were a year ago.

[MichMan]

5. I have a portion of my IRA in bond funds

Their performance at best has been pretty lackluster that last few years.