Financial markets are looking for reassurance around a Trump presidency's policies in historical parallels (Reagan is cited, but Carter and Eisenhower both have a claim). The positive reaction of markets to Trump's conciliatory speech yesterday may be indicative of the desire for a degree of conventionality.
Fiscal policy is an area of relative certainty. The emphasis on infrastructure spending and the fact that Trump's tax code parallels that of House Republicans indicate near-term stimulus. The backdrop is of near full employment and inflation at or above long-term averages on most measures.
The risk that the US Federal Reserve falls further behind the curve on inflation into next year is rising on fiscal policy alone (without considering trade policy or the Fed's independence). This rising inflation risk suggests that the US dollar is vulnerable to weakness, in our view.
Investors must now consider how robust the global economy is, with uncertainty about broader US policy. We have three Fed speakers today (we still expect a December rate hike). Smaller Euro area economies are offering up inflation data (showing oil price effects).