Speaking on the PA Podcast, JP Morgan’s chief market strategist for Europe and the UK said that while the view that the reflation trade began on the day that Donald Trump was announced US President-elect is mistaken, it has given a lift to animal spirits.
“If you look at when the bond market started turning it was actually in the summer… Many people felt we had reached a turning point there because of what was happening with inflation before Trump and because what was happening to global economic activity,” she said.
Explaining that global purchasing managers’ indices both in emerging markets and developed markets had begun to gain momentum in unison for the first time in a while in September she added: “Some of this reflation trade was already underway and was fully justified by other things going on, but of course there is always the question of animal spirits. I don’t think Hillary Clinton would perhaps have benefited from the extra catalyst where people are thinking the US economy is really going to be given a boost.”
This increase in optimism, that Portfolio Adviser has already remarked upon, when combined with the type of policy currently expected from Trump means that the risk of a US recession this year has declined, she said, but she added, it was also made it more likely that the US is going to run a little too fast.
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It also means, she said, that Trump’s election could shorten the economic cycle by bringing forward extra growth and support for the economy, thus bringing forward the date of the next recession.”
