Treasuries Are Not Priced For Trump

By Dhaval Joshi, chief strategist at BCA Research

Summary

• The absence of a geopolitical risk premium in US Treasuries is a standout mispricing in the markets right now.

• In addition, US inflation expectations are starting to un-anchor.

• But higher bond yields are not necessarily bad for stocks if the short-term real interest rate falls.

• Overweight German bunds and UK gilts versus US Treasuries and JGBs.

• Underweight bonds versus cash and neutral-weight stocks versus cash…

• …which implies overweight stocks versus bonds.