What Will Derail The Trump Rally?
Investors have aggressively rotated out of bond proxies and into cyclical assets since the election see below. Optimism and anticipation of expansionary fiscal policy, lower taxes and laxer regulation has been the main driver of these moves.
Naturally the question being asked is what will derail the rally. The Rates and FX desk at Bank of America Merrill Lynch conducted a survey to answer that question. As the chart below shows roughly a third of investors believe softening growth data would disrupt the rally. This was followed by higher real interest rates and increased trade rhetoric from Trump.
The survey had 76 participants and was taken between December 2, 2016 and December 7, 2016.