UBS with the note.
It’s too early to know for sure if Trump will be the next President, what his policies would be and to what extent he would undo current policy programmes,” the analysts said, adding, “There is little signal yet in the relative performance of renewables to oil or autos and in longer-dated MXN, CNY or EUR vol, suggesting the Trump trade isn’t yet in motion.
We think the consensus is significantly underestimating how different the starting points in the US economy, equity markets and broader risk premia are this time. The economy is much later cycle; fiscal room, and very likely the bond market’s patience, are exhausted; earnings expectations are higher and, perhaps most importantly, risk premia are already much tighter. A rise in bond term premium could quickly dilute equity optimism.
