Odd Lots Harley Bassman on Trump, the Fed, and the Bond Market
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Nov 7, 2024 
Harley Bassman, managing partner at Simplify Asset Management and creator of Convexity Maven, dives into the bond market's response to Trump's election victory. He discusses the surprising rise in Treasury yields amidst anticipated Fed rate cuts. The conversation shifts to how investor sentiment is reshaping expectations around regulatory changes and market volatility. Bassman also explores the interplay of economic policies and political pressures during Trump's term, revealing the complexities of navigating such a turbulent financial landscape.
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Market Reactions to Trump's Reelection
- Trump's reelection caused a stock market rally and a rise in bond yields, indicating decreased uncertainty in equities but increased uncertainty in bonds.
- The VIX collapsed while the MOVE index remained high, showing this divergence.
Source of Bond Market Volatility
- Bond market volatility, measured by the MOVE index, increased due to the uncertainty surrounding the Fed's actions and Trump's policies.
- This volatility is reflected in the bond market, not the stock market, which has remained relatively stable.
Economic Growth and Rates
- Economic growth's impact on rates is complex due to long and variable lags, making it challenging to incorporate into rate outlooks.
- Money printing eventually leads to inflation, as seen recently with higher rates and inflation despite a stable stock market.