There’s no pump like the Trump pump. Get on it! | Bonds & Fixed Income

In my final problem for Australian Small Cap Investigator, I mentioned some of the methods the US authorities may shield its bloated US$37 trillion bond market.

This is important for the bull market in small caps, and markets typically, to proceed.

There’s an obscure news story that you just need to learn about. I can’t see anybody else speaking about it in our home financial reporting.

For sure the average Australian is definitely clueless on it, and the implications.

The Trump administration is transferring to dismantle one of the laws positioned on the US banks in the aftermath of the 2008 disaster.

It’s often called the “supplementary leverage ratio”.

Politico stories it like this…

“The complex rule was designed as a backstop to make sure banks are equipped to absorb unexpected losses on any asset, not just ones that regulators deem riskier.

“The policy requires banks to hold the same amount of capital against risky loans and safe assets like U.S. Treasuries.

“Bessent and Republican proponents say it will be a boon for the Treasury market because it will allow banks to better facilitate the buying and selling of government debt.”

It’s on account of occur over the US summer season, doubtless August, a quiet time for Wall Street typically (when else does one vacation in the Hamptons or Barbados?).

It may all sound a bit heavy.

All we need to actually know is it could give American banks a highly effective incentive to buy US “Treasuries”…which is US authorities debt.

Get it?

Trump wants more Treasury consumers to fund his tax cuts and the ongoing US deficit.

He can get the banking system to help him do it this manner. This will doubtless additionally push yields decrease, and take that risk away from the stock market for the second.

Trump’s former “bro” Elon Musk calls Trump’s “big, beautiful bill” laws – with the tax cuts and deficit spending held in place – “a disgusting abomination”.

I assume the new President is maybe not what Elon thought he could be.

There’s more to this.

When a bank, any bank, acquires an asset, it merely creates the credit to take action.

Presto!

The bank now owns a US Treasury bond, or 10, or US$100 billion price. It will steadiness the books later.

Multiply that by more banks. Suddenly, we’re doubtless going to seek out the US markets and economic system awash in new money.

Everyone in finance talks about when the “Fed” – the central bank – buys bonds it’s “printing money” or “monetizing the deficit”.

It is.

But the above bank behaviour is the identical factor.

It’s bullish, in the short to medium time period, if it goes forward as deliberate.

I’m not saying we will go up in a straight line. Markets are risky.

But it seems to be to me like Trump goes to cut taxes and juice the economic system with credit to make it look like his insurance policies “work”.

This is a platform for a complete lot of speculative money to start out washing over the world markets, ASX included.

There’s no pump like the Trump pump. You and I are going to experience it whereas it lasts.

When credit booms, markets go up. Then watch Trump take the credit for all the “wealth” created.

My small cap recreation plan requires us to go from Stage 2 of the bull market, the place we are actually, in my opinion, to a Stage 3 part – wild hypothesis.

Trump is simply the man to take us there.

If you’re eager to take benefit of this dynamic, go right here to learn my latest report.

It incorporates 5 suggestions that I consider are on account of fly larger as the small cap bull market actually begins to fire.

Two of these are associated to the gold market.

Even higher, each concepts will not be utterly dependent on the gold price persevering with to rise, despite the fact that I consider it should over the medium time period.

You have a number of methods for these concepts to repay. I can’t gauarantee something of course.

But all the things Trump does make the outlook for gold shine brighter.

Get began right here. This dynamic gained’t final eternally.

Best needs,

Callum Newman,
Editor, Small-Cap Systems and Australian Small-Cap Investigator

I’ve had little curiosity in platinum for years. I not often take a look at the chart.

In a latest assembly somebody talked about it, so I introduced up a long-term chart and instantly felt my jaw drop.

It is uncommon to see such a basic set up that has taken 10 years to unfold.

But there it was staring me in the face.

The large rally a few years in the past.

Then the immense fall into the buy zone of the complete uptrend.

A retest of the level of control that meets stiff resistance.

And then one other bounce off the buy zone.

The quarterly buy pivot from the buy zone was confirmed in December 2022.

Since then we have now seen years of vary trading. Shaking up the coke bottle..

Volume has spiked in the final yr and the price is testing the high of the trading vary.

The promised surge in demand for electric autos hasn’t eventuated. Instead hybrid autos are seen as the best compromise between environmentalism and utility.

So the fears that demand for catalytic converters would plummet is being changed by the realisation demand may very well increase.

Perhaps platinum is about to rise from the ashes.

Regards,

Murray Dawes,
Editor, Retirement Trader and Fat Tail Microcaps