JPMorgan Analysts Warn of Potential Economic Impact from Donald Trump’s Presidency
JPMorgan analysts have raised concerns over the potential economic consequences of Donald Trump winning the upcoming presidential election, emphasizing that markets have not adequately factored in associated risks.
In a client memo, analysts pointed to several key Trump campaign policies that could spur inflation. They noted that financial markets have not yet incorporated a sufficient risk premium for these policies’ potential inflationary effects.
One major concern highlighted in the memo is Trump’s proposal to extend the 2017 tax cuts beyond their current expiration in 2025. Analysts predict this move could significantly alter the fiscal and debt trajectory of the United States, thus contributing to inflationary pressures.
Additionally, the Trump campaign’s plan to tighten immigration policies, including the deportation of illegal immigrants, might tighten the labor market, potentially leading to wage increases and further driving inflation.
The imposition of tariffs on imported goods is another policy proposal likely to raise domestic prices, thereby intensifying inflationary pressures.
Furthermore, analysts pointed out the potential replacement of Federal Reserve Chairman Jerome Powell post his term’s conclusion. Although legislative changes to reduce the Fed’s independence are seen as improbable, the mere discussion of such reforms could heighten long-term inflation expectations and steepen the US Treasury yield curve, influencing market dynamics.
The memo, issued ahead of the Trump-Biden debate, concludes that Trump’s policy agenda could significantly elevate inflation risks, inflation expectations, and the issuance of US Treasury bonds.
*This memo does not constitute investment advice.
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