By Tim Price – London Investment Alert (Great Britain) –
So, lightning does strike twice after all. If the consensus was wrong about Brexit, it was irretrievably, hopelessly, unbelievably wrong about Donald Trump.
I attribute this in large part to the myopic nature of social media – a communications channel that Trump put to effect cannily, while Hillary Clinton squandered her media budget in more conventional ways.
The problem with social media is that the likes of Twitter can increasingly display the attributes of an “echo chamber”, in which supporters of a given clan congregate, reinforce their biases, and tune out any rivals.
This would account for why so many – millennials in particular – could not see a Trump election coming from a million miles away until it smacked them in the face like a wet fish.
I don’t want to dwell on the politics. Or, for that matter, on the personalities. So let’s cut straight to the economic and financial ramifications, such as we can discuss them sensibly.
In short, bad for bonds, good for stocks.
As I suggested in the last London Investment Alert: “If you have meaningful exposure to bonds in your portfolio, you should as a matter of urgency reconsider the composition of your portfolio.”
That advice wasn’t predicated on expectations of a Trump victory in the US presidential election – merely on recognition of the fact that bond yields had become unsustainably low.
Bond prices, their inverse, had become unsustainably high, and were dancing on the edge of a volcano. The Trump victory was all it took to push them over the edge and into the inflationary fire.
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