Donald Trump's surprise ascent to the U.S. Presidency will no doubt have a dramatic impact on global markets for years to come, but the biggest initial effect is the so-called "reflation" trade.
Trump didn't take long to express his plan to increase economic growth; at the very start of his acceptance speech, the new president-elect outlined a plan to expand fiscal stimulus: "We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals. We're going to rebuild our infrastructure, which will become, by the way, second to none. And we will put millions of our people to work as we rebuild it."
Many market participants have viewed fiscal stimulus as the "missing piece" to the economic puzzle, and the prospect of an injection of government spending into the economy has led to a dramatic reaction in markets.
In simple terms, Trump's economic plan should drive inflation higher, leading to an increase in the value of the US dollar, higher bond yields, and an extension of the current market rally. In terms of specific sectors, materials, construction, and defense stocks are all poised to benefit in the weeks to come.
Trump didn't take long to express his plan to increase economic growth; at the very start of his acceptance speech, the new president-elect outlined a plan to expand fiscal stimulus: "We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals. We're going to rebuild our infrastructure, which will become, by the way, second to none. And we will put millions of our people to work as we rebuild it."
Many market participants have viewed fiscal stimulus as the "missing piece" to the economic puzzle, and the prospect of an injection of government spending into the economy has led to a dramatic reaction in markets.
In simple terms, Trump's economic plan should drive inflation higher, leading to an increase in the value of the US dollar, higher bond yields, and an extension of the current market rally. In terms of specific sectors, materials, construction, and defense stocks are all poised to benefit in the weeks to come.
