While watching the election on Nov. 8th, one not only got minute by minute updates on the voting results but also saw the Dow futures plummeting down over 800 points and heard pundits talking about the market crashing because it looked like Trump was going to win.  As it turns out, they were right about a market going down.  However, it was the bond market that has reacted poorly and not the stock market.  Since the election, the yield on the 10-year Treasury Note has risen from a little more than 1.7% to 2.25% and the 30-year Treasury Note yield rose from roughly 2.5% to 3%.  Investors owning longer term Treasury Notes have lost money!  Let’s take a look at the exchange traded fund TLT (IShares Barclay 20+ year Treasury).  TLT is down 6.2% since the election and more than 15% since July 8th.  The possibility and implications of rising interest rates were the topic of our October 17, 2016, market update.   Instead of worrying about the Federal Reserve raising interest rates, bond investors should have been more concerned about the Trump growth agenda of lower taxes and increased infrastructure spending.   Trump’s election is changing perceptions of inflation and, in turn, interest rates.

What does this mean for investors?

First, if you have any debt (mortgage, equity line of credit, business loan, etc.) that has a variable interest rate associated with it, you should convert to a fixed rate as soon as possible.  Second, we believe large multi-national companies will be hurt by rising interest rates, as many of them have large debt loads and are selling at high valuations. We discussed this topic in our August 16th market update.  Finally, we recommend waiting to buy longer dated bonds and certificate of deposits at this time.  We believe it is still best for one to be “risk off’ when investing in fixed income securities.