Now the financial markets are voting
The stock market absolutely loves the idea of a Trump presidency.
The Dow jumped nearly 600 points -- a 3.2% gain -- in the three days after Trump's victory. It was up again Monday and hit a new all-time high in the process. The S&P 500 and Nasdaq also moved a bit higher after Trump's win.
A Republican in the White House and Republicans keeping control of Congress increases the chances of a bill being passed that would lead to more infrastructure spending. There may also be less regulations on health care stocks and financials.
Nothing like huge tax cuts for big corporation, plus slashing regulations, to drive up stock prices.
The equity bull is roaring.
However, there is another side to this expectation of a Trump presidency.
President-elect Donald Trump's White House victory was a surprise, and so is the ripping sell-off in global bond markets, which has quickly driven U.S. interest rates to the highest levels in a year. The rout has wiped out an estimated $1 trillion from global bond markets and has Wall Street scrambling to retool its forecasts.
The sell-off comes on the expectation that Trump's promised infrastructure spending and tax cuts will result in higher growth — but also higher inflation and higher amounts of U.S. government debt.
So far the rise in interest rates is not cause for alarm, but that could change soon.
Average rates on 30-year fixed conforming mortgages on Monday hit 4%, also the highest since January, according to MortgageNewsDaily.com, and up nearly 0.4 percentage point since the election. While still only roughly half the average over the past 45 years, according to Freddie Mac, the quick rise has lenders worried that home loans could become more expensive far sooner than anticipated.
Debt issued by U.S. companies has been hit as well. While the S&P 500 is up 1.2% since last Tuesday, the iShares iBoxx $ Investment Grade Corporate Bond ETF has fallen 2.5%. The iShares iBoxx $ High Yield Corporate Bond ETF, which tracks bonds issued by junk-rated companies, fell 2.2%.
The 41 basis point jump in 10-year Treasuries over the last three trading sessions marked the steepest climb in more than seven years.
Probably the biggest impact is in the export-dependent emerging market, scared of Trump raising tariffs.
U.S. President-elect Donald Trump appears to have burst the bond bubble, putting emerging markets (EM) from Mexico to Indonesia at the sharp end of a sell-off.
Also the gains in the stock market have been uneven, to put it mildly.
Over the past month, the telecommunications sector is off 7.5%, real estate is down 4.2% and utilities have lost about 4%, the top three worst performers among the S&P 500’s 11 sectors, according to FactSet data.
However, the really big losers are the high-tech sector.
Tech stocks in the benchmark equity gauge have slumped 3.1 percent over four days, trailing the S&P 500 Index by 4.2 percentage points, the most since May 2009.