Source: Jin10 Data
Author: Yang Large Cap

Greenlight Capital's President David Einhorn expressed that the election results are good for avoiding the political stability issues he was worried about not long ago. However, in terms of the economy, he expects that Trump's second term policies will bring about higher inflation, thus leading to a bigger problem.

"We have increased our bets on inflation," he said on Wednesday. "We expect another upward inflection point on inflation; the proposed policy mix from the Trump administration is inflationary, and we will see more of this in the coming years."

Einhorn predicts that inflation could rise to between 3.5% and 4.5%, but will not reach the worst levels of 7% to 9% seen in the usa economy over the past 40 years.

The latest CPI data released on Wednesday showed that the year-on-year growth rate of the usa CPI in October was 2.6%, in line with market expectations. The latest PPI data released on Thursday also met expectations.

Einhorn's concerns stem from all the proposed tax cuts by Trump; even if he does not pursue all tax cuts, or if Congress refuses to pass all tax cut measures, the combined effects of a strong economy, wage growth, and immigration policies that lead to inflation (from both cost and labor perspectives) will result in "a series of inflation".

He said, "I don't know how they will choose to respond; one view is to tolerate it and keep the economy as strong as possible. I really don't know what they will do."

Einhorn stated that although he has recently talked about how expensive he believes the market is and considers himself one of the last value investors in a "broken market," he is not pessimistic about us stocks. He likened himself to a repairman and revealed that he has bet on a battered agriculture stock, which he believes is one of the few bargains left in the market.

Nelson Peltz, the CEO of Trian Partners and billionaire investor, expressed that although he is pleased with Trump's victory and views the Harris administration as a disaster, the market rally will not last, and the extreme concentration of a small group of high momentum stocks is one factor.

Despite facing unexpected pressure on yields for USA government bonds in a Federal Reserve interest rate cut environment, Einhorn stated that the bonds market has not yet begun to price in the 'difficult USA government bond yield situation', which is due to his concerns about Trump's expansive economic policies.

Anne Walsh, Chief Investment Officer of guggenheim Partners Investment Management, also mentioned this specific concern, forecasting that due to factors like worries over tax cuts and deficit spending, USA government bond yields will continue to be under pressure, and the bonds market will experience higher volatility than stocks, a situation that could last for several years.

Editor/Jeffy