Markets closed 2020 on strong footing and the recent Democratic sweep in the US makes a greater fiscal push more likely, leading us to lift our 2021 GDP growth forecast for the US to 5.2-5.7%, 1% above previous estimates. This marks a great divergence between the US and the rest of DM, where we have been lowering our forecasts.
Markets are suddenly questioning the no inflation forever narrative, especially in the US, amid an accelerating economy. UST yields have been rising and the US curve steepening further at a very fast rate in just a few days. Market inflation expectations have also risen to two-year highs.
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