Reflation and the case for Leveraged Loans

2017

There is no question that Trump’s unorthodox style has the potential to create volatility over the next four years. However, his pro-growth reflationary agenda is something that investors began to take hold of within twenty four hours of his election. Both equities and interest rates began their march higher over the following weeks.

As investors delved into Trump’s ambitious political agenda of individual and corporate tax reform, economy-wide deregulation and potential infrastructure spending, many embraced the increased likelihood of larger fiscal deficits along with its corresponding higher growth. As a result, interest rates and inflation expectations significantly rose over the last quarter of 2016. We remain cautiously optimistic that many of the Trump administration’s economic growth-enhancing regulatory and legislative reforms will be implemented in the coming months. If Trump is successful in the implementation of his agenda this may potentially mark the beginning of an elongated rising rate environment in part created by “Trumpenomics”.

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