By Nell Mackenzie
If Donald Trump wins the U.S. presidential election, expect a surge in long-term U.S. Treasury yields, warns Benjamin Melman, Chief Investment Officer at Edmond de Rothschild Asset Management. Trump's policies on taxes and immigration could impact the U.S. labor market and economy significantly, Melman stated during the firm's H2 outlook press conference.
Following the June 27 debate, where Trump gained momentum over President Joe Biden, ten-year U.S. Treasury yields hit over three-week highs, nearing 4.5%. This increase is seen as a reflection of the market's anticipation of a Trump victory.
Melman highlighted that Trump's agenda is inflationary, with proposed tariffs on imports and a massive deportation plan. These policies could lead to price hikes for consumers and fuel inflation, affecting the long end of the U.S. yield curve.
Edmond de Rothschild has adjusted its approach to European assets due to political uncertainty in France, focusing on bond market positions that capitalize on rate differentials and hybrid debt strategies.
For investors, a Trump win in the U.S. election could mean higher Treasury yields and potential inflationary pressures. This could impact various financial markets and investment strategies, especially in fixed income and European assets. Understanding the implications of political events on the economy is crucial for making informed investment decisions.