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Great economic expectations are the bull market’s next test


Investors who were betting on US reflation but are now worried about President Donald Trump’s ability to push through his pro-growth agenda may be in for an unwanted economic surprise: a lack of them.

A growing chorus of strategists are warning that the jolts of economic growth that have helped power stocks over the past six months may no longer serve as a tailwind for risk-taking, while headline global inflation looks close to peaking.

A lack of positive economic surprises and waning price increases may combine to test the market’s faith in the reflation trade at a time when the Trump administration’s failure to push through health care reform has already sowed doubts.

“I think markets are going to be caught in a vicious circle: a failed perception of pro-growth US policies — thanks to politics — combined with a slowdown in positive data at a time when economists’ expectations probably couldn’t be higher,” said Julian Brigden, managing partner at Macro Intelligence 2 Partners, an independent research firm.



Last Update: 02/04/2017

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