Source: Wall Street See

After experiencing a dramatic market fluctuation, the USA ​bonds market shows signs of recovery, and the 'Trump trade' is gradually fading.

In early London trading on Friday, the yield on the 10-year USA ​bonds fell by 5 basis points to touch 4.29%, almost returning to the closing price before the election results were announced. As of now, the yield on the 10-year USA ​bonds stands at 4.33%.

Previously, investors had expected Trump's tariff and tax reduction plans to stimulate economic growth and trigger inflation. Investors flocked to the stock market and sold ​bonds, while hedge funds 'stood aside,' significantly reducing their total leverage.

After the election results were announced, the 10-year bond yield briefly surged to 4.48%, hitting a four-month high, with hedge funds' total trading activity seeing the largest increase in seven months. However, over the next two days, traders reduced some positions, and the dollar also gave back some gains.

Overall, the market is bullish, with the US stock market hitting new highs and small cap stocks surging.

Analysis suggests that this is because the market's response to Trump's victory was 'subconscious.' Now, doubts arise about whether Trump will fulfill policies as scheduled, if his tariff remarks are just initial negotiation positions, and whether the ambitious tariff measures can pass through Congress.

Many fund managers believe that the market may become quite frothy, and analysis suggests that hedge funds may once again take profits as they are skeptical of the sustainability of the rebound.

Matthew Morgan, fixed income head at Jupiter Asset Management, stated:

"I don't think Trump will trigger an inflation wave, the cooling job market proves that the market's expectations of rising inflation are too high."

On Thursday, the Federal Reserve cut interest rates by 25 basis points at its monetary policy meeting as scheduled. Powell stated that the central bank will not "speculate" on Trump's policy content and its impact, and he believes that it is still too early to determine whether the new president's policies will change the outlook for interest rates. He also emphasized that even if asked to resign early, he will not step down prematurely.

William Vaughan, Deputy Portfolio Manager at Brandywine Global Investment Management, also said:

"It is important to focus on the policies announced, rather than the pre-election rhetoric, as candidates often release extreme statements in order to win elections."

However, some analysts also point out that if the Republicans sweep Congress, the ultimate victory will pave the way for Trump's tax cuts, immigration and trade policies, as well as the confirmation of nominees.

Editor / jayden