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Pro Analysis

Breakingviews: Markets’ 1980s style revival on Trump looks like a flawed throwback

Traders on the floor at the New York Stock Exchange, New York City, USA, 2nd June 1981.
Barbara Alper | Getty Images
Traders on the floor at the New York Stock Exchange, New York City, USA, 2nd June 1981.

Financial markets are having a retro moment. The prospect of big tax cuts and higher interest rates in the United States have given government bond yields and the dollar a boost. Investors are drawing parallels with the 1980s, when similar policies held sway. There are good reasons, though, to doubt that asset prices will mimic the past.

The catalyst for the 1980s revival is U.S. President-elect Donald Trump. Investors are betting that his plans for higher spending and lower taxes will help growth, albeit by swelling the budget deficit. The pickup in economic activity is expected to stoke inflation, spurring the U.S. Federal Reserve to raise policy rates faster and further than previously anticipated.