Since Donald Trump won the US election markets have been desperately searching for an investment narrative to build their investment strategies upon. Given the unprecedented situation we find ourselves in, with a character like Donald Trump, market participants have sought shelter by forming a consensus view of how things will pan out during the Trump administration. This has given rise to the Trump trade (or Trumpflation trade).
What is the Trumpflation trade?The narrative is fairly straightforward:
- Out of all the sound bites Donald Trump gave during the election campaign the one that the market sees as most credible, for now anyway, is his promise to spend $500bn on infrastructure. While the figure is plucked from the air the consensus view is that the man who says he 'builds great structures' will build a lot of things, whether you include the Mexican wall or not
- Donald Trump has also pledged to cut taxes
- Both measures start to fall under the fiscal stimulus category.
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