Opinion | Economic outlook post-election: Inflation vs. growth

On November 7th, Anders Persson, Chief Investment Officer of Nuveen, shared his insights on the current economic landscape following the recent election, emphasizing the intricate relationship between inflation and growth in both the U.S. and Europe during the Webinar. He noted that analysts expect short-term inflationary pressures as markets adjust to potential policy changes, particularly in relation to immigration and trade.

Trump's stance advocating for a "weak dollar" contrasts sharply with the current trend of a strengthening dollar, driven by anticipated fiscal measures and tightening immigration policies. Analysts express concern that if Trump pursues a weak dollar strategy, it could lead to a sell-off in U.S. assets as market participants adjust their expectations.

In the U.S., the market reaction has been largely predictable, with a significant increase in the 10-year Treasury yield and tighter credit spreads, indicative of a risk-on sentiment among investors. However, Persson highlighted increasing apprehension regarding medium to long-term growth impacts, especially as the Fed may need to pause rate cuts in light of rising inflation expectations.

In contrast, European markets have demonstrated resilience, initially showing strong performances in equities and bonds. Nonetheless, underlying growth concerns persist, particularly as Europe faces challenges from potential tariffs and increased NATO contributions. This situation may lead to further tightening of European credit spreads and a cautious stance from the European Central Bank.

Regarding the strength of the U.S. dollar, Persson attributed its recent performance to widening rate differentials, with ongoing expectations of a continued divergence in monetary policy between the U.S. and Europe. Analysts predict that the euro could decline further, potentially reaching the 104-105 range, while the Japanese yen may face intervention if it approaches 160.

(By Kato Ip)

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