The persistent behavioural dynamics of deflationary fear seem to be changing, with investors starting to get excited about accelerating US growth and reflation. This faster growth narrative does have some potential merit.
However, we would caution investors to remember that Trump was elected by everyday Main Street Americans and not Wall Street financiers. Even before considering higher potential costs from trade restrictions, increased wages and the resulting inflationary pressures in the US could meaningfully dampen corporate profitability and returns, which have been critical but often-ignored fundamental drivers of this elongated bull market cycle. Have investors become too optimistic about the impact of a Trump presidency? Even before Trump's victory, market-derived inflation expectations in d...
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