Is The Market Pricing In A Trump Win?

The Winners Of The Debate Were Those Who Didn't Watch

The markets closely watched Friday’s PCE price index reading and got exactly what they were looking for. Prices were unchanged in May, confirming what we saw from the BLS numbers, which also showed a 0% change on headline inflation. The futures market, which prices in rate cut expectations, was little changed, suggesting that this was largely expected and doesn’t really change the calculus for what the Fed might do later this year.

What was interesting, however, was the bond market’s response. The disinflationary result should have, in a vacuum, supported the idea of lower interest rates, but the 10-year yield rose 11 basis points on Friday. Did Thursday night’s debate have that kind of impact? It’s not outside the realm of possibility. A second Trump presidency would likely be more pro-business than a second Biden term. Let’s not forget 2016 when the S&P 500 rose by 23% in the year following election day, while long-term Treasuries initially plunged by about 10% before slowly recovering. We could be seeing a similar response given that a Trump win looks more likely than it did 48 hours ago.Is