14th November 2016
Weekly Market Commentary
The moment that we never truly envisaged would arrive has done just that. Donald Trump’s ascension into the White House won’t actually take place until mid-January, but the preparations are already underway following his barnstorming election victory on early Wednesday morning.
It appears that a new term has already been coined, and that is ‘Trumpflation’. Yields on US Treasuries have soared in the aftermath of the result, in anticipation of an expansionary US fiscal policy that will drive growth. Funnily enough, the Brexit style sell-off never materialised across the pond, and the S&P 500 is not expected to end the week in the red. Are the markets being too premature however?
Since many chief economists would still not be able to tell you which stage of the economic cycle we are at, the markets are left guessing. If inflation does take off, then this is likely to force the hand of the Federal Reserve, who must surely be pondering a rate hike in December. Deflationary pressures still loom large however, and while other central banks continue to buy bonds, this could help keep a lid on yields.
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