Reflation Trade Back In Full Swing?
This past week has seen the reflation trade come back in full swing as evident by the price action in various asset classes. Equities, WIT, US10Y all pushed higher, and even though the Dollar was a but stubborn at the start of the week it also came around on Friday by pushing lower in line with the reflation narrative.
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Right now, there is a growing camp of market participants who are calling for the next imminent market crash, and for the less dramatic calling for a sizeable correction at least.
Some of the reasons given for a potential correction in the reflation trade is concerns about virus mutations and whether current vaccines are effective against them. There are also concerns about various risk sentiment gauges showing a lot of exuberance.
Then there is also the disconnect between some economic data and asset prices, and those pointing out that valuations in certain metrics are near or have surpassed prior bubble levels. There is also the Dollar which could get interesting should relative growth dynamics come back into play.
However, despite all that, there are still ample number of positives such as ultra-easy monetary policy, incoming fiscal stimulus, global vaccine rollout, very easy econ data base effects and very easy company earnings comparisons.
The biggest positive might still come into play in the sessions ahead as equity volatility (VIX) has reached very significant levels once again. With a light calendar in the week ahead, focus will be firmly fixed on overall risk sentiment, with added attention on the VIX and DXY.
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Highlights of the video:
00:26 – Current Baseline
02:57 – Baseline expectations for the upcoming week
05:27 – Sentiment Shifts & Trade Plan
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If you find these weekly analysis and trade ideas useful, you’ll love Financial Source. There’s a link below were you can learn more about it
https://financialsource.co
----
We interpret and explain price moves in real-time, 24 hours a day. Our team of analysts produce text, video and audio commentary.
You understand the markets and trade with confidence. Learn more at our website here: https://financialsource.co
-----
Right now, there is a growing camp of market participants who are calling for the next imminent market crash, and for the less dramatic calling for a sizeable correction at least.
Some of the reasons given for a potential correction in the reflation trade is concerns about virus mutations and whether current vaccines are effective against them. There are also concerns about various risk sentiment gauges showing a lot of exuberance.
Then there is also the disconnect between some economic data and asset prices, and those pointing out that valuations in certain metrics are near or have surpassed prior bubble levels. There is also the Dollar which could get interesting should relative growth dynamics come back into play.
However, despite all that, there are still ample number of positives such as ultra-easy monetary policy, incoming fiscal stimulus, global vaccine rollout, very easy econ data base effects and very easy company earnings comparisons.
The biggest positive might still come into play in the sessions ahead as equity volatility (VIX) has reached very significant levels once again. With a light calendar in the week ahead, focus will be firmly fixed on overall risk sentiment, with added attention on the VIX and DXY.
----
Highlights of the video:
00:26 – Current Baseline
02:57 – Baseline expectations for the upcoming week
05:27 – Sentiment Shifts & Trade Plan
----
If you find these weekly analysis and trade ideas useful, you’ll love Financial Source. There’s a link below were you can learn more about it
https://financialsource.co
