Forecasting Trumponomic Inflation






Link w/ Data & Image


The above charts shows a forecast.
The RED line is the Fed's 5 Year Forward Rate, the BLUE line shows a forcast of .5% inflationary growth per year over the next few years, begining next year. This is NOT a stretch (2011-2012 inflation rate increased from 1.94 to 2.45% alone). In June, consumer prices increased 1.7% over the previous month alone in Nigeria, according to the National Bureau of Statistics. Granted, the US does not have such inflation volatility.

Here are a few factors to think about:

1. A crack down on illegal workers will (or could) stress the hourly wage index
2. Infrastructure Spending (To be frank: Multi-Trillion Dollar Infrastructure Spending)
3. Trade Isolationism, Increased Import Tariffs, Export Losses

The above situations are already on the agenda. Of course a level of inflation is always there, but I am curious if the above chart is coservative. The chart below has an exponential trendline (in green) showing the uptick from the CPI time series monthly data.

Let us not forget the great inflation of the 1970s, which lasted late 1972 - the early 1980s. Professor Jeremy Sigel, called it: the greatest failure of American macroeconomic policy in the postwar period.



 CPIAUCSL - UMICH


From November 14th, 2016 - We’ve had a sentiment shift in the bond market. We’ve seen it, too. People have already started reallocating out of bonds and into stocks.  - Jeffrey Gundlach, CEO of DoubleLine Capital.
See link - Trump Thump whacks bond market for $1 trillion loss.



30 Yr Breakeven