After the surprising victory of Donald Trump in the US Presidential election last week, many are trying to make sense of the outcome. While polls and prediction markets indicated a close race, the extent of Trump’s win, including capturing all swing states and winning the popular vote, caught many off guard.

There has been much speculation about the reasons behind Trump’s victory, with various generalizations about American beliefs and cultural assumptions about different demographics. However, one undeniable trend is the widespread dissatisfaction with incumbent governments around the world. This year saw a decrease in vote share for governing parties in developed countries, including the left-wing Democrats in the US, the right-wing Conservatives in the UK, and nationalist governments in Turkey and India.

A common factor among these countries is the high levels of inflation experienced in 2020. Prices have soared in the UK, US, and Turkey due to the pandemic and supply chain disruptions from conflicts in Ukraine and the Middle East. Historically, populations have always been averse to inflation, leading to social unrest and uprisings when basic needs become unaffordable.

As Trump prepares to take office in January, one of his key challenges will be to control inflation. However, concerns about his policies, such as tax cuts, tariffs, and deportations, have led to doubts about his ability to address inflation effectively. Market indicators, such as the rise in the 10-year US treasury yield and breakeven inflation rate, reflect investor skepticism about Trump’s economic management.

The Federal Reserve’s recent decision to cut the Fed Funds Rate suggests a belief that inflation is stabilizing. However, market forecasts often outperform individual economists in predicting inflation trends. Trump’s past statements about loyalty and control raise concerns about his ability to manage market expectations and prevent an inflationary shock to the economy.

As Trump’s presidency unfolds, it is crucial to monitor how his policies and actions impact inflation and market confidence. The market’s ability to anticipate economic trends highlights the importance of staying informed and adaptable in an ever-changing financial landscape.