The Black-Swan Event That Could Lead To Inflation

The Trump victory is essentially Brexit Two, or perhaps more apropos: the US Brexit.


F:GC Volume - Last Night





Despite the turmoil of election night, most losses will not sustain.
Arguments can be made that the spikes with ES & GC were due to hedges in place in case of a black swan event. I was asleep at the switch on Trump; I expected a catastrophic GOP loss. However, it does seem that we overreacted to the idea of Trump and - despite it being early - the US markets are not taking hits like Brexit.




F:ES Last Night - Noon



Trump is a real estate guy and he may make the right moves. He is not an economist, technologist or a lawyer, but he does know how nuts and bolts industry work (to a degree). I imagine that he will stick to the age old tip of choosing people smarter than yourself, and choosing the smartest person for the job. Let's hope he has goals in sight because he has the ability to pick the greatest group of economic and public policy advisors ever seen. If that is the case then America will turn around. I do not see how we can kickstart deceased industry in the rust belt, and this leads one to think of trade wars, but commodities could be sourced from US suppliers with some increased costs, and America could rebuild + add jobs. Investors and underwriters would need to be willing to pay the premium to rebuild America, and trends show support, especially now. Trump could mandate a municipal bond underwriting trend to rebuild America and we could have a repeat of the 1950's, including a new baby boomer generation, a striving middle-consumer class and bubbles...

This is just one scenario out of many that I envision coming into effect over the next few years. There is no doubt we need infrastructure rebuilding and reinvestment into our country. Private employment hiring is expanding, but will this lead to inflation and or significant pricing bubbles brought on by over investment and over supply?

Here is a quote + chart from Torsten Sl√łk, Chief International Economist @ Deutsche Bank Securities: "I’m getting many questions about the potential for a significant fiscal expansion and what it means for growth, inflation, and the Fed. The chart below shows that construction worker wage growth is already near 2006-2007 levels and hiring more infrastructure workers for government projects is going to put even more upward pressure on wage inflation."



Hourly Wages