In this commentary we discuss:

  • Greater political uncertainty in the US, and well as Europe, suggests higher volatility and risk premia across asset classes.
  • We are skeptical that the Trump administration’s policies will lead to higher trend growth, and the thrust of trade, immigration and fiscal policies increases risks of higher inflation.
  • Not surprisingly, breakeven inflation rates (BEI) have risen since the election. Still, BEIs can serve as a source of relatively cheap insurance against inflationary policies.

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