David Einhorn of Greenlight Capital has increased his bets on inflation, anticipating a rise to 3.5%-4.5% due to proposed tax cuts and wage growth under Trump's policies. He expressed concerns about the inflationary impact of these measures, while also noting the stock market's high valuations and potential volatility in the bond market. Nelson Peltz of Trian Partners echoed these sentiments, highlighting the concentration of market power among a few high-momentum stocks.
Buying bonds as the Federal Reserve cut rates has proven to be a miscalculation, with yields remaining unexpectedly high due to persistent federal deficit concerns and potential inflation from Trump's policies. Anne Walsh of Guggenheim Partners anticipates continued volatility in the bond market, projecting the 10-year Treasury yield to fluctuate between 3.5% and 4.5% for the foreseeable future. The cost of extending and enacting new tax cuts could reach $10 trillion, raising questions about the sustainability of such fiscal policies.
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