Financial markets are as divided over Donald Trump as voters are.
Stock markets love him. Bond markets hate him.
Stocks have mostly been rising because the president-elect plans to slash regulation and business taxes and spend more, all of which is good for corporate profits. The Dow Jones industrial average is up 3 percent since Tuesday’s election.
By contrast, bond investors have been selling, sending yields soaring. They expect higher inflation and higher government debt as Trump opens the fiscal spigots to get the economy to grow faster, as he has promised. Inflation hurts bonds because it eats away at the value of their fixed interest payments.
The yield on the 10-year Treasury note has risen from 1.75 percent just before Trump’s victory to 2.30 percent, a big move. Of course, investors could be getting a Trump presidency all wrong and quickly reverse their recent moves. A Republican Congress might reject or at least limit any economic stimulus that would entail large amounts of additional spending and borrowing.
Either way, expect a bumpy ride. When politics are in upheaval, so are markets.