Originally posted on LinkedIn on February 23, 2017
Equity markets have been on a tear in the US and Canada since the US presidential election. Government bond yields also spiked initially, given the market's expectations concerning fiscal stimulus (lower taxes, higher infrastructure spending) and deregulation.
However, while equity markets have continued to exhibit upward trajectory in 2017, government bond yields appear to have taken a pause. In fact, 2-year, 5-year, and 10-year yields on both sides of the border have yet to recover from their post-election highs in mid- to late December 2016 (though they certainly tried to around inauguration).
Arguably, uncertainy around the amount and timing of fiscal stimulus (which requires some cooperation from Congress), as well as uncertainty around trade policy, immigration, and other issues, has led bond market participants to temper their expectations.
Neil Lindsay, BBA, MBA is a finance lecturer, tutor, and consultant, who has been teaching finance to MBA, Executive MBA, and professional students for fifteen years. He is also an award-winning finance and public policy professional, with private sector and pubic sector experience in corporate finance, capital markets, and risk management. Neil may be reached at email@example.com.