JPMorgan analysts say another Donald Trump presidency looks like a road leading towards inflation for which many may not be prepared.

“Markets do not appear to have yet priced in much risk premium for the inflationary implications of the Trump campaign’s major policies,” JPMorgan analysts said in a note to clients.

JPMorgan listed statements by the Trump campaign that suggest the following policy goals:

He intends to extend his 2017 tax cuts, severely restrict immigration with a plan to deport foreign-born illegal immigrants, and impose tariffs on imports, the analysts noted.

These are all likely to be inflationary, they said.

Tariffs across all US imports would presumably lead to higher US prices.

Severely restricting immigration is likely to put upward pressure on wages.

And extending the 2017 Tax Cut and Jobs Act that expires at the end of 2025 is likely to induce a more expansionary US fiscal and debt trajectory, thus also posing inflation risk.

The bank’s analysts noted that Trump also plans to replace Federal Reserve Chair Jerome Powell after his term ends, along “with some talk” of changing laws to reduce the Fed’s independence.

The Fed

Changing the Federal Reserve Act to reduce the Fed’s independence seems unlikely to get enough support in Congress even if Republicans control both chambers, the analysts wrote.

Still, the rhetoric alone could have a market impact, most likely through a rise in long-term inflation expectations, causing a steeper UST (US Treasury) curve.

The note was written before Thursday’s debate.

It concluded that “Trump’s policies overall may imply significant upside risks to inflation, inflation expectations and UST issuance.”

Meanwhile, a letter signed by 16 Nobel Prize-winning economists spearheaded by Joseph Stiglitz also warned that another Trump administration would reignite inflation.

Stiglitz told Business Insider: “I think general consensus, not just my view, but almost anybody modeling what is going on would say the Trump administration would be more inflationary.”

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