After the unexpected victory of President Trump last November, the 10 year treasury yield shot up to as high of 2.60% on March 9, 2017 up from 1.80% before Donald Trump was elected president. The S&P 500 rose from 2,163 after the election to an intraday high of 2,396 on March 1, 2017, about the same time as the 10 year treasury peaked in yield. The S&P 500 is currently at 2,341, +8% since the presidential election results.
Much of the increase in yield to 2.60% on the 10 year treasury was the result of fear the U.S. economy would go off to the races with all the expected U.S. economic growth under President Trump's leadership. The Fed moved rates up .25% in March and we have been hearing 2-3 more rate likes are expected. We were hearing about huge gains in infrastructure spending and tax cuts which would go right to the bottom line of corporations after the Trump budget budget got passed. We also were hearing about more money in the pockets for U.S. taxpayers to invest in stocks and for hiring more people. President Trump has learned the hard way not all his initiatives will breeze through. He still has no wall being built to separate the U.S.A. from Mexico, Trumpcare was D.O.A., and the Trump budget won't be a slam dunk even with Republicans controlling Congress.
Fast forward to Q1 of 2017, the first quarter growth rate was likely below 1% according to a CNBC/Moody's survey. Economists still see a big rebound in growth in the 2nd quarter and 2 to 3% growth for 2017. What if U.S. growth rates come down for all of 2017 like they did in Q1 of 2017? I could then see the 10 year treasury piercing below the 1.37% level which few people expect right now. It wasn't long ago the talk of the town on Wall Street was we are heading for 3%+ on the 10 year treasury this year. Either the stock market or bond market are right about future economic growth. Perhaps this is the pause that refreshes in stock prices or a pause in the uptrend in U.S. interest rates. Only time will tell.
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