As the bond market reels from the spiking yields and the surge in volatility, analysts at Charles Schwab are predicting that last week’s “Trump put” was a potential policy response to the bond market and not the stock market.
What Happened: Charles Schwab highlighted in its recent note that the significant yield fluctuations in bond markets were fueled by the unprecedented level of uncertainty, with the U.S. weighted average tariff rate reaching a century-high.
However, Schwab advised the investors to adopt a factor-based approach, screening for high-quality investments. “Low volatility, low beta, high interest coverage, and stable profit margins are among the characteristics that have fared well in this recent bout of turbulence.”
While these factors might underperform during brief periods of tariff relief or delay the news cycle, they are expected to provide resilience during periods of heightened uncertainty, stated the note.
This bond market volatility, measured by the MOVE index or the Merrill Lynch Option Volatility Estimate, surpassed the stock market’s CBOE Volatility Index or VIX, indicating a deep-seated unease among fixed-income investors.
This led to a 90-day pause in the tariff implementation, …