Market On Open, Monday 3 November
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T-365
by Alex King, CEO, Cestrian Capital Research, Inc
The 2026 Midterms are exactly a year from now, and more so than most Administrations, the equity and bond market feature front and center in the election campaign. The “good news” stories have begun.
There is a re-shaping of the world order afoot, and its magnitude is causing investors to not think clearly in my view. Politics being what it is at the moment, opinions on the changes rolling through the world are somewhat polarized. I think investors continue to be fooled by their own feelings on the topic. Those in favor of a move beyond the post-WWII settlement are generally positive in their outlook, those who wish to halt or slow the pace of change are uncomfortable. Everyone grownup knows to not let their own political opinions get in the way of making money, but I think that sometimes people cannot help it. I think all the time about the Druckenmiller self-reflection after incinerating $3bn at the top of the tech bubble in 2000 - I’ve referred to that in these notes recently - he said that he didn’t learn anything from this terrible mistake “because I already knew to not do that”.
US government bonds fall into this category. Personally I have been saying for many months that I see no way that US Treasuries are going to fall from favor as the world’s preferred store of value. Those predicting the demise of Treasuries point to the policy upheaval as the reason why investors “should” or “will” desert the instrument; my view has been, well, where then will they put all that money? Chinese government bonds? No, because of the uncertainty of how the relationship with China is going to play out. EU government bonds? No, because to date there is no EU-wide equivalent to US Treasuries, you have to pick an individual country’s bonds to buy and no single country in the EU, or combination of countries, offers the economic strength of the US. And thus far, price continues to support this notion; yields have been falling since the inauguration and will, I think, continue to drop. Those yields are falling, and bond prices rising, whether you are in favor of the global restructuring, against it, indifferent to it or ignorant to it. Your opinion doesn’t matter. Only price matters.
This, by the way, is why machines are so good at trading; sometimes a pretty simple machine too, because in the machine’s world all it sees is price, volume and some derivatives of those variables. This is how to trade and how to invest.
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