A phone call to a bond desk promises just one thing—a depressing rundown of all the things markets could possibly fret about. Right now, they're worried about President Donald Trump.
The concerns are obviously not irreversible, but they took on a new flavor this week on several fronts. First, there was a geopolitical tone, with a new hawkish view of an untested president, as he warned the U.S. could go it alone against North Korea if necessary and blamed Russia for the chemical attack in Syria.
The U.S. showed a new bravado, firing cruise missiles at a Syrian air base and on Thursday, dropping the biggest non-nuclear bomb ever on Afghanistan. Treasury yields fell, moving inversely to prices, as traders worried about the potential for a North Korea missile launch this weekend in celebration of its founders day. They also were concerned the U.S. could react.
The iShares Barclays 20-plus year Treasury Bond ETF, a proxy for the bond market, jumped more than 2 percent since Friday, while the S&P 500 lost 1 percent in the four-day week.
"This is a man who was an isolationist—America first, who now seems to be more aggressive on the geopolitics front," said David Ader, chief macro strategist at Informa Financial Intelligence.
Then there was the about-face on a number of other things. In an interview with the Wall Street Journal Wednesday, the president reversed himself on a campaign pledge to call out China as a currency manipulator.
Trump also said he was undecided about reappointing Fed Chair Janet Yellen, when during his campaign there were thoughts he could even force her to leave before the end of her term. Then there was the reversal of his view on the Export-Import bank, which he suddenly now supports.
While these reversals were not all seen as negatives by the market, they just raise doubts about what Trump's promises have meant and whether he will keep those most important to markets—on tax reform, deregulation and fiscal stimulus. Treasury yields have crept lower as these policies have seemed less certain, with interest rates breaking through an important range this week.