Financial markets have reacted strongly to Trump’s election. The stock market has risen sharply because it sees an agenda of tax cuts, increased spending, and deregulation as good for economic growth. Yet the bond market has tumbled as it sees those plans, and proposed tariffs, as inflationary.
Both may have over-reacted. The cabinet is just forming with a mix of controversial and traditional picks. The president-elect is already softening campaign promises, and won’t be able to implement his entire agenda.
What is not speculation, however, is that October retail sales were impressive with +0.8% m/m gain. September sales were revised up +0.4% to a strong +1.0% m/m. The back-to-back gains drove the y/y rate up to +4.3%, almost twice as high as the +2.2% recorded in August. Excluding volatile components, “core” sales (which feed into GDP calculations), gained +0.8% m/m to reach a +4.0% y/y rate. October’s gains were widespread across most categories. E-commerce retailers continued to outpace all other categories, gaining 1.5% m/m to a blistering 12.9% y/y rate. The results bode well for both holiday sales and Q4 GDP.
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