During the election campaign he made sexist, racist and discriminatory remarks in an attempt to get different sections of the American voting public onside.
But his main goal, right from his first election speech, has been to “make America great again”.
That means more jobs, tax cuts for corporate America, tighter borders, and better trade deals.
So is he succeeding? Is he actually “delivering the goods” to his voters?
What if I told you a very wealthy, powerful collection of people are already starting to make up their minds about Donald Trump?
The crash in the Mexican peso predicted the Trump presidency weeks before the election. Now, however, it’s the bond market (and the peso to a degree) that is predicting how long Mr Trump may last in the top job.
Ok, very briefly, because I’m likely to lose you if you’re not even vaguely interested in the bond market … but bonds are IOUs. You pay money and receive a piece of paper, with the promise that you’ll receive an income stream (interest payments) while you hold that piece of paper.
GIF: Bonds are basically just IOUs The piece of paper is like an investment property, and the interest payments are the equivalent of rent.
The bond itself is what’s called a “debt security”. If you own a bond, you want the price of the bond to rise. Just like any other asset.
If you’re looking to buy a bond, you’ll hold out for a high interest rate.
That makes for an inverse relationship between the bond price and the yield. Confused? You’re in very good company!
I only highlight that because I bring that concept up a little later in the piece. You don’t really need to know why the yield and price move in opposite directions, but they do.
The bond market is worth many trillions of dollars. The US bond market itself (in its various forms) is worth well over $10 trillion. It’s one of the single largest markets in the world, and the biggest worldwide collection of debt.
The 10-year US Treasury bond is a benchmark debt security. It’s like a term deposit in terms of an investment, except it’s the US Government that wants your money, not a bank.
The thing about the 10-year Treasury bond market is that its movements tell a much bigger story. If the yield on the Treasury bond rises, it means that investors forecast better economic times ahead, and the need for higher interest rates. If the yield falls, investors are forecasting the opposite.
As you can see from the chart, the yield on the US 10-year Treasury bond market started to rise around the time Donald Trump won the election. It continued to rise for several weeks. Recently, however, the yield has fallen.
The 10 year treasury started to rise around the time Mr Trump won the election, and rose for several weeks. If it was the price of one house, or the price of a single stock, or even a collection of currencies moving in a particular direction, you’d be forgiven for being a little sceptical. This is different.
This is trillions of dollars’ worth of international and American debt saying something about Mr Trump.
What’s it telling us about the Trump presidency?
I’m in danger of over-simplifying this but Mr Trump was elected to office to “make America great again”. That means more jobs and higher living standards (especially for the Rust Belt).
That means more jobs and higher living standards (especially for the Rust Belt).
His plan? Well as I mentioned above, he said he’s going to bring back manufacturing, boost spending on infrastructure, and offer up some big corporate tax cuts as well.
While we’ve heard some evidence that there are plans in place to make some of these elements a reality, nothing as actually happened yet. And that’s fair enough because these things take time. What’s lacking though is detail.
The President has had a number of opportunities, including last week’s speech to Congress, to deliver on detail, but he’s failed to do that. So at this point, the bond market is making up its own mind about Mr Trump’s likely success as a president, and it’s far from encouraging.
Often markets turn first, then the economy, then, finally, voters. His followers have so far been incredibly loyal, but if there’s evidence Mr Trump isn’t going to bring back the jobs he promised, his days as president will be short-lived.
It’s been fascinating watching Wall Street in recent weeks. Just when you thought the key stock benchmark index couldn’t rise any further, it does. The Dow Jones Industrial Average has easily cleared the psychological 20,000 level, and seems to post fresh record highs every day.
It’s clear the stock market still believes Mr Trump will deliver on his corporate tax cuts promises. In fact, any announcement short of what he’s already promised would see the share market fall. In other words, his promises have been fully “priced in”.
Sean Callow is a senior currency strategist with the Westpac Bank in Sydney. He told me last week it’s unusual to see two major markets (the bond and stock markets) diverge so obviously on a single issue. Essentially the stock market thinks Mr Trump will succeed, and the bond market still needs convincing.
He told me, “something’s gotta give”. What he means by that is that either Mr Trump will deliver, and bond yields will rise again, or Mr Trump will fail, and the US stock market will correct.
I suspect a major market judgement on the presidency is imminent given the all-time highs the stock market is pushing, and the degree to which the bond market has pulled back.
Think of an elastic band stretching to its limit — that represents the current market tension around the presidency.
The Mexican peso, US dollar currency pair is also telling a story.
The crash in the peso late last year was a throw forward to Donald Trump’s election win. Would you believe it’s since recovered? Quite a bit in fact. It’s now approaching the level it was against the US dollar before the crash.
Slide 1 of 40: FILE PHOTO – President Barack Obama (R) greets President elect Donald Trump at inauguration ceremonies swearing in Donald Trump as the 45th president of the United States on the West front of the U.S. Capitol in Washington, U.S., January 20, 2017. REUTER
On alleged wiretapping by the Obama administration
“Terrible! Just found out that Obama had my “wires tapped” in Trump Tower just before the victory. Nothing found. This is McCarthyism!”
“Is it legal for a sitting President to be “wire tapping” a race for president prior to an election? Turned down by court earlier. A NEW LOW!”
“I’d bet a good lawyer could make a great case out of the fact that President Obama was tapping my phones in October, just prior to Election!”
“How low has President Obama gone to tapp [sic] my phones during the very sacred election process. This is Nixon/Watergate. Bad (or sick) guy!”
In a series of four tweets, sent on the early morning of March 4, 2017, Trump accused Barack Obama of wiretapping him in the run-up to the presidential election.
Watch the bond market!
There are three options: Mr Trump sees out two full terms in office; he serves just one term; or he’s thrown out of office (replaced).
Markets are powerful. If trillions of dollars’ worth of global funds continue to turn against the President, his chances of even making to the end of the first term are diminished.
The problem with winning an election on the back of big economic promises is that you open yourself to market judgement.
If the markets turn on Mr Trump, and the economy falters, Mr Trump’s voters will start to question if he really can make America great again. If the populace turns on the President, he’s finished.