Remember what the Trump story is all about? His policies will drive economic growth higher, inflation will rise, the Fed will need to raise rates faster and the dollar will soar. To see the story, all you had to do was look at short-term U.S. interest rates which were climbing fast after years of stagnation and deflation worries under Obama. That’s why the Trump trade is also known as the inflation trade. Buy stocks and the dollar and sell bonds and gold because bond yields are going higher.
So, below is a chart of the yield curve for the two year U.S. Treasury note. This is a good one to watch because it is short term and therefore under the influence of Fed rate hike expectations. The yield begins to soar the moment Trump wins the election. Two weeks after his inauguration, not so much…it begins to fall. Gold starts an upward move. The beginning of the end for the Trump inflation story?