In the ever-evolving political and economic landscape, the relationship between President Donald Trump, Federal Reserve Chairman Jerome Powell, and the bond market has become a focal point of intense scrutiny. As Trump continues to voice his discontent with the Fed's monetary policy, the real battle may lie in the clash between the president-elect's economic agenda and the bond market's response.

Shaping the Future: The Tug-of-War Between Trump and the Bond Market

Tariffs and Inflation: The Looming Clash

During his reelection campaign, President Trump promised to implement broad tariffs on all imported goods, including a particularly high tariff on goods from China. This position has raised concerns over a potential uptick in inflation, just as the Federal Reserve is cutting interest rates. The bond market, which is often seen as a barometer of economic sentiment, will play a crucial role in determining how much of Trump's economic agenda will be implemented. According to BCA Research chief strategist Marko Papic, "President Trump was not elected to generate more growth and inflation. … He was elected to curb both." Papic believes that the bond market will act as a restraint on Trump's fiscal policy, forcing a pivot towards a more laissez-faire approach. This outcome, Papic suggests, should be welcomed by the bond market, but not before it compels the necessary pivot.

The Bond Market's Influence: Treasurys and Yields

The bond market's influence has already been felt, as evidenced by the recent sell-off in Treasurys. The 10-year Treasury note yield has risen more than 80 basis points since mid-September, reaching 4.431% as of the last report. This surge in yields reflects the bond market's anticipation of potential inflationary pressures and the impact of Trump's economic policies.

Trump's Receptiveness: A Clash of Wills

It remains to be seen how receptive President Trump will be to the cues from the bond market. After all, he has just secured a resounding electoral victory, which may embolden him to pursue his economic agenda more aggressively. The bond market, however, is a formidable force, and its influence on the implementation of Trump's policies cannot be ignored.

Wall Street's Perspective: UBS Upgrades 3M

Elsewhere on Wall Street, UBS has upgraded 3M to a "buy" rating from "neutral," with a 12-month price target implying more than 40% upside for the industrial giant. The bank believes that the new CEO at 3M has the potential to drive meaningful change at the 120-year-old company, which could lead to improvements in organic sales growth and operating margins, ultimately driving earnings per share (EPS) upside and justifying a better valuation for the stock.In conclusion, the tug-of-war between President Trump, the Federal Reserve, and the bond market will be a key focus in the new year. The outcome of this battle will have far-reaching implications for the implementation of Trump's economic agenda and the broader economic landscape. As the bond market continues to exert its influence, it will be crucial for all parties involved to navigate this complex and ever-evolving situation with prudence and foresight.