US: Trump reflation expectations take a hit – Westpac
|Analysts at Westpac explain that Trump reflation expectations have been pared amid legislative challenges and the ongoing controversy around Russian meddling in the election.
Key Quotes
“Long term yields have retraced about ½ their Trump driven surge while the USD is below levels at the time of Trump’s win. Republicans remain heavily divided between a conservative House wing and mainstream Senators. Crafting policies that satisfy both in each chamber is a nearly insurmountable challenge, as the recent legislative failure around healthcare reform has shown.’
“A persistently weak run of US data in recent weeks, as Trump optimism fades in the sentiment surveys, has pushed US data surprise indices down to multi month lows too. Altogether sentiment both on Trump reflation and US growth momentum has cooled materially.”
“Expectations may be getting too downbeat. Our surprise index has strong mean reverting qualities, and the legislative failure around healthcare might be a clarion call to Republicans to coalesce around tax cuts, especially given the approaching mid-terms in late 2018.”
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