They call it the Trump effect, the sharp and mostly unexpected rebound that, from the lows of early November, gave a boost to the equity markets worldwide. Not all the markets reacted the same and the swings were also influenced by volatile currencies. Just think at the big correction of the Japanese yen that dropped more than 10% against the Greenback in a few days.
This Newsletter has reiterated that bonds are not an asset class that should be in one`s portfolio unless they are safe short-term high-yield corporate issues. The election victory of Donald Trump seems to have been the catalyst that set off a global rout for fixed-income securities. 10yr Treasuries yield increased from 1.88% on 8th November to 2.34% on 18th November 2016. Of course, if the yield increases, that means that the price on paper in the secondary market decreases.
US dollar is overvalued and that investors would do well to move out of that currency. In the long run the national debt, which is currently 106% of GDP, and the balance of payments deficit, currently running at about 40 to 45 billion dollars a month, are unsustainable. Of course the US is the largest single economy globally and has huge reserves of coal, oil and gas besides extensive farming land. So it is not to be expected that the US dollar is going to collapse. It could soon however gradually lose 20% to 30% of its current value.
