Policy uncertainty 'matters' for bond and equity investors
Treasury yields (^TNX, ^TYX, ^FVX) gain after fresh inflation data — December's Personal Consumption Expenditures (PCE) index — came in line with economists' expectations as investors brace for President Trump's tariffs on imports from Canada, Mexico, and China. Bridgewater Associates' former chief investment strategist Rebecca Patterson joins Julie Hyman and Josh Lipton on Market Domination to discuss worrying signals she's seeing from the bond market. "Despite the headlines today on tariffs, I think we won't know anything until we actually see the headline that they've been implemented, and even then, I think it's all a question mark," Patterson says. A Friday report alleged that the president was considering delaying his tariffs to March 1, which White House officials later refuted. "To me, the most important thing right now is we now have lived with two weeks of this new world order, which is going to be a lot of intraday and short-term volatility questions around policy. And that matters because, over time, if companies are less certain about what the rules of the road are, they're going to be more cautious about hiring and investment. And if consumers are more cautious, they might slow spending." Patterson points to these two patterns as potentially weighing on future GDP (gross domestic product): "So, the uncertainty matters. Not knowing what the rules of the road are going to be from day to day has an effect." She points to gold prices (GC=F) as proof that the "volatility... [and] uncertainty is rippling through the markets." The metal closed at a record high alongside rising bond yields. "The rise we're seeing in the longer term yields is what they call term premium. It's the extra that investors want to loan the government money for longer," she says, tying this rise to policy uncertainty around issues like tariffs and tax cuts. To watch more expert insights and analysis on the latest market action, check out more Market Domination here. This post was written by Naomi Buchanan.
