[ad_1]
The “reflation trade“That has dominated financial markets since the advent of coronavirus vaccines last year has been hit after the Federal Reserve unexpectedly he pointed to a change in his stance on inflation.
Investors had rushed to buy stocks that could benefit from faster inflation, betting that the combination of an exceptionally simple monetary and fiscal policy and a global economy emerging from its Covid-19 closure would lead to an increase. of prices.
However, after inflation data was unexpectedly strong in recent months, the Fed earlier this week advanced its guidelines on when it could start raising interest rates, and noted that it would soon begin arguing over when it would reduce its bond purchases by $ 120 billion a month.
He unexpected central bank pivot it has destroyed many of the most popular reflation trades, such as smaller stocks, gold and commodity prices, and boosted other assets that have been languishing lately.
“The Fed’s most baffling surprise change for risk management reasons reverberated Wednesday through global financial markets on Thursday, with violent movements across and within asset markets as investors liquidated hedges inflation and declining inflation, ”said Krishna Guha, vice president of Evercore ISI.
Guha said the liquidation of leveraged inflation operations made it difficult to draw firm conclusions about market views on the Fed’s change as they could amplify market movements, but noted investors could begin to question the commitment. of the central bank with its new more flexible system. inflation targeting regime.
Natural resources suffered the greatest success from the relaxation of reflection trades. Bloomberg’s commodity price index fell 3.6% on Thursday, its biggest one-day drop in more than a year, with a 1.5% drop in WTI oil.
The so-called USA stock value – often more disadvantaged and cheaper companies and more sensitive to the pace of economic growth – fell another 1.3% on Thursday to widen the initial fall they suffered on Wednesday, the day the Fed announced. MSCI’s global stock index had already fallen 1.2% on Thursday.
The Russell 2000 index of the smallest US companies fell 1.1%, the largest investment in more than a month, while the price of an ounce of gold troy fell to a minimum two-month low of $ 1,773 on Thursday, before slightly comparing the decline on Friday.
However, other assets have benefited. The ever-lower odds of the Federal Reserve escaping inflation helped trigger a rebound in U.S. long-term treasuries and other stocks that benefit from deflationary pressures, such as highly valued corporate bonds, el US dollar and many important technological actions.
Matthew Hornbach, head of Morgan Stanley’s global macro strategy, said the Fed was even at risk of provoking another “rage” in the line of the market upheaval it caused when in May 2013 it indicated that would begin to end the post-financial crisis stimulus situation.
“The risk of rabies has decreased,” Hornbach wrote in a note. “The hawkish change a… Appropriate policy assessments raise legitimate questions about the timing and pace of downsizing, and the pace of subsequent walks.”
[ad_2]
Source link
