In the build up to the FOMC meeting last week, President Trump had been beseeching Federal Reserve Chair Powell to cut rates and cut big, and ideally restart QE. Ultimately, Powell cut rates by 0.25% – the minimum he could get away with.
The press conference following the cut saw Powell address, on multiple occasions, the deteriorating trade (war) situation. A situation that had deteriorated just that morning as trade talks were abruptly adjourned; cynics could suggest that this took place to apply pressure on Powell to reduce rates further. This failed, however Trump had another card to play, and on Thursday announced new tariffs, sending equity markets and yields swiftly downward which, in turn, applies yet more pressure on the Fed.
As opposed to equities which have masochistic preference for bad economic news, bonds seem to go higher (yields plummeting) on an almost daily basis. Through a bizarre example of the greater fool theory, bond traders feel that, even with negative yields, they can sell to somebody even more foolish tomorrow and at an even deeper negative yield.
In the last few weeks we have had several update meetings with our bond managers. Discover their positioning and ours, along with which holdings we are using to benefit from the global yield carnage in our full ‘Monthly Market Update’ in PDF here.
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If you have any queries regarding this update, or any questions relating to anything else, please do not hesitate to contact us by clicking here.