Economic Outlook

Surging equity markets seem poised to continue, fueled by strong U.S.-led economic growth. However, this growth may lead to higher inflation, particularly in the U.S., as President Trump moves forward with his plans for higher trade tariffs.

In light of the current uncertainty surrounding U.S. trade policy, strategists at MRB Partners predict a continuation of a “risk-on” sentiment. This outlook is supported by robust economic performance in the U.S. and a steady strengthening of global economies. Nonetheless, they caution that this scenario may elevate inflation rates in developed markets, especially in the U.S.

Despite Trump’s initial moderation, he has made it clear that tariffs would be implemented as part of his administration’s trade strategies.

MRB Partners believe that although tariffs may be applied selectively and moderately, they will likely contribute to increased inflation, reminiscent of trends seen during the previous Trump administration.

Currently, the U.S. economy appears in a much better position than it was in 2017, when Trump first took office amid economic challenges. Yet, the present inflationary environment is more pronounced, raising concerns that increased tariffs will have a significant impact on inflation this time around.

MRB noted that the U.S. economy now exhibits heightened inflationary tendencies and rising wage pressures compared to the late-2010s, which may result in broader impacts on the Consumer Price Index (CPI).

A key concern expressed by strategists is that both U.S. and global financial markets currently do not seem to account for the potential ramifications of rising inflation.

According to the strategists, U.S. asset prices and the dollar reflect expectations of solid economic performance while underestimating the likelihood that such growth will spur inflation. Should inflation rise and Treasury yields increase, investors might need to reevaluate their risk positions.