HOLMES ON THE MARKETS (NOT HOUSES)

"The past and the present are within my field of inquiry."

-Sir Arthur Conan Doyle

With the election of Donald Trump, we have severed ourselves from the past. This is not only true for us individually, but also for both the stock and bond markets. We are staring down the faces of two wars, tariffs, new regulations, old regulations that have been cancelled, and a new government that is primarily focused on business and not politics. Everything, including our judicial system, is in the process of changing and whether you agree or not is not the issue. The issue is the recognition of what is underway.

"It is a capital mistake to theorize before one has data. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts."

-Sir Arthur Conan Doyle

During Trump’s Presidency the S&P 500 Index has underperformed relative to the rest of the world, and the US share of world market capitalization has slipped, while European stocks, currency, and government bond yields have risen. The dollar has weakened, and Treasury yields have tumbled, with investors increasingly looking to invest elsewhere, such as in European markets, due to a shift away from U.S. economic and market exceptionalism. Just weeks ago, investors were hailing Donald Trump’s return to the White House as a reason to bet that his blend of tax cuts and tariffs would supercharge economic growth, in turn boosting U.S. stocks and the dollar at the expense of international peers. The so-called Trump trades were on. Now that mood has quickly soured. I, however, am taking the opposing track. In the Press, Trump and his team are frequently called “disruptors.” I do not agree with this sentiment. My choice of words would be “innovators,” as he tries to get our country back upon a solid course. What is of great importance here is that he and his people are using “common sense” and are not tilting everything upon the political course of re-election. There was a time when American politicians were Americans first, instead of being Democrats or Republicans first, and I would like to see this radical changed flipped back to its originations.

For international investors, there’s another consideration when assessing whether to allocate to U.S. debt is volatility. A widely watched measure of U.S. rates turbulence has surged to the highest since the day after the U.S. election, according to Bloomberg. Volatility is a funny thing. It can overwhelm you, but it also gives you the possibility of taking advantage of what it brings to the markets’ table. In my income strategy I watch the rapid movements constantly and I take advantage of the opportunities that they offer. Yields ebb and flow and I am glad they do. There are many more possibilities now than when the markets are sanguine and calm, which is something that is not going to happen anytime soon, under our current Administration. "How often have I said to you that when you have eliminated the impossible, whatever remains, however improbable, must be the truth?"

-Sir Arthur Conan Doyle

The truth, in my humble opinion, is that volatility is your friend, and not your enemy, and that it can help you in finding higher and higher yields plus giving you the chance of appreciation. The ranting in the Press is just that, “ranting,” and I advise you to put it in the corner where it belongs.

Opportunities abound. Seek them out!

Mark J. Grant

Chief Global Strategist

Colliers Securities

[email protected]

U.S. 954-999-0933