1. The fact that the Fed wants to raise rates three times this year tells us that they are worried about the economy moving towards overheating
2. The economy is already at full employment, confirmed by anecdotes of higher minimum wages and labor shortages across industries
3. Average hourly earnings have trended higher since 2014
4. US may be reversing on the “strong dollar” policy to boost US exports
5. Import prices are trending higher
6. Producer prices are trending higher
7. Breakeven inflation expectations are trending higher
8. Lower corporate taxes will boost growth and hence also inflation
9. Increased infrastructure spending will lift growth and hence also inflation
10. Lower household taxes will raise growth and hence also inflation

All variables in the Fed’s model of inflation point to higher inflation in 2017:
Inflation = F(Inflation expectations, unemployment rate, oil prices, import prices)

Eoin Treacy's view

Here is a link to the full report.

The USA’s legislative agenda for the next couple of years represents both an enormous opportunity for reform and unlocking growth but also an uncertainty since market expectations are now geared towards optimism and disappointments will likely be greeted with selling pressure. 

The S&P 500 has posted three rallies of approximately 100 points since the election and reactions have been relatively shallow which allowed short-term overbought conditions to be at least partially unwound. Another such pause is due if this pattern is to remain consistent. At the same time a somewhat deeper consolidation cannot be ruled out. 

US Treasuries are at an interesting level as the yield tests the 2.5% level. That marks the region of the progression of lower rally highs since the December peak and a sustained move above it would signal a return to supply dominance beyond the short term. 

The S&P500 Banks Index experienced an explosive breakout following the Presidential election and continues to hold a progression of higher reaction lows. It is becoming increasingly overextended relative to the trend mean and a break in the short-term progression of higher reaction lows would likely signal some consolidation of gains.