High growth, high interest rates and high inflation as a combination did not work out so well for Joe Biden and Kamala Harris. Will Donald Trump fare any better? Last week, equity markets surged upon Trump’s election win. The S&P 500 was up almost 5 per cent and many financial stocks — banks, M&A advisers and private capital firms — jumped more than 10 or 15 per cent on belief that lighter regulation and more deals are on the way.
Less conspicuous, perhaps, but more important was the yield on the 10-year US Treasury bond. Since the Federal Reserve started cutting its benchmark short-term rates a couple of months ago, the 10-year yield has oddly climbed steadily. Last week it reached 4.4 per cent.
Markets are looking through near-term loosening to the medium-term picture for inflation and growth. While inflation has abated after the central bank’s rapid tightening of policy in 2022 and 2023, US consumer price index growth remains above the Fed’s 2 per cent target.