据媒体报道，自11月6日特朗普获胜以来，Investors are concerned that potential policy changes during Trump's second term could lead to a resurgence of inflation, and the strong performance of small cap stocks also indicates that inflation will be faced in the stock market. However, the inflation protection provided by the csi commodity equity index seems to be less than usual, with gold, oil, and copper all experiencing varying degrees of decline since the election...
Since the election, the market's indicator of future five-year expected inflation - the breakeven inflation rate has seen the largest increase in over a year. Analysts have raised their inflation expectations, investors have reduced bets on rate cuts, and the Fed's path to controlling prices seems "difficult and long"...
US core inflation data will be released this Wednesday. A survey by Reuters shows that economists expect US inflation to heat up in October: the core PCE index is expected to rise by 0.3% month-on-month, and the overall inflation rate is expected to rise by 0.2% month-on-month. Fed Chairman Powell previously expected core PCE to rise by 2.8% year-on-year. Analysts believe that multiple factors are driving inflation indicators to remain "high".
Trump's policies will push up inflation.
According to media reports, since Trump's victory on November 6th, $U.S. 10-Year Treasury Notes Yield (US10Y.BD)$rose by about 14 basis points thereafter, indicating investors' concerns about possible policy changes in Trump's second term, such as larger budget deficits, widespread deportation of illegal immigrants, and massive tariffs that may lead to a resurgence of inflation.
As a result, Deutsche Bank's American economists have raised their inflation forecast for 2025. They expect the PCE index next year to remain at or above 2.5%, higher than the previous expectation of 2%.
Powell warned earlier this month:
"The progress of inflation is much 'rockier' than expected".
Under the dual impact of Powell's remarks and Trump's upcoming new policies, the market's expectations for a Fed rate cut have cooled significantly. Currently, the market prices in less than a 60% chance of a 25 basis point rate cut in December.
Small cap stocks perform well, sounding the alarm on inflation.
If concerns about Trump's policies are just precautionary, then the performance of small cap stocks is a real warning.
Historically, small cap stocks have always been beneficiaries of so-called re-inflation trades. However, SEI's Smigiel warns that:
"The outstanding performance of small cap stocks may be an early warning of stock market inflation, as high economic growth may lead to price increases."
Since November, due to expectations that Trump's proposals of "tax cuts" and "bringing the supply chain back to the USA" will ultimately boost small businesses focused on domestic operations, U.S. small cap stocks have been soaring.
FactSet data shows that last week, $Russell 2000 Index (.RUT.US)$ rose by 4.5%, while large cap $S&P 500 Index (.SPX.US)$and technology stocks $Nasdaq Composite Index (.IXIC.US)$both only rose by 1.7%.
Commodity defense is limited.
The concerns about inflation are escalating. Under the catalysis of risk aversion, many investors are turning to commodities to hedge risks and resist inflation.
However, this time, the protection provided by commodities seems to be less than usual. Since the election, gold, oil, and copper have all experienced varying degrees of decline, especially oil.
Goldman Sachs's Head of Asset Allocation Research, Christian Mueller-Glissmann, said:
"Commodities will not protect you from the impact of these (events)."
Analysts point out that on the one hand, oil prices in the USA are facing downward pressure, and the problem of oversupply remains unresolved. On the other hand, Trump's tariff policies will harm trade, affecting the demand for oil and industrial metals, while gold may fall due to tariffs boosting the U.S. dollar.
Editor/Rocky
