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Stocks Up, Bonds Sideways

2017-02-22 02:22:22 | Misc

The global stock market indices keep going up thanks to the so-called "Trumpflation trade".

Trumpflation??? What is it?

It is the inflation that might appear during Trump's U.S. presidential administration. Though Trumpflation is still only speculative, markets have already signaled they believe Trump will spur inflation in the U.S. dollar.

There are a number of reasons Trump's policies could cause a shift away from a disinflationary post-financial crisis environment. The president has promised to spend $1 trillion on infrastructure projects over ten years. While he has separately promised to reduce or even eliminate the nation's $19.8 trillion debt, most independent analyses agree that Trump will raise deficit spending. The resulting boost to the economy is likely to spark reflation.

At the same time, Trump's hostility to the current Federal Reserve's accommodative policy indicates that he will shift the burden of stimulus from monetary to fiscal policy. That move could signal the end of an era of central bank bond-buying.

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