{"id":63275,"date":"2017-05-29T01:10:00","date_gmt":"2017-05-28T23:10:00","guid":{"rendered":"http:\/\/beta.next-finance.net\/strategie\/should-we-still-play-reflation-trades\/"},"modified":"2017-05-29T01:10:00","modified_gmt":"2017-05-28T23:10:00","slug":"should-we-still-play-reflation-trades","status":"publish","type":"post","link":"http:\/\/beta.next-finance.net\/en\/strategie\/should-we-still-play-reflation-trades\/","title":{"rendered":"Should we still play reflation trades?"},"content":{"rendered":"<p>Since Donald Trump was elected, investors have<br \/>\ngradually been reassured on their fears on deflation,<br \/>\ngrowth in emerging markets, and uncertainties on the<br \/>\neuro area, which had dented appetite for risk between<br \/>\nend-October 2015 and mid-February 2016. They<br \/>\ntherefore played the global reflation theme.<\/p>\n<p>World growth is clearly accelerating and resynchronizing,<br \/>\nand the threat of deflation is dwindling.<br \/>\n<quote>This combination<br \/>\nof an upturn in real growth and a rise in inflation is<br \/>\nbroadly favorable for the overall earnings per share<br \/>\ngrowth trend, which should come out at close to 13%<br \/>\nthis year.<\/quote><\/p>\n<p>The phase of acceleration in inflation now seems to be<br \/>\nbehind us and leading indicators are beginning to turn<br \/>\naround in some areas, particularly the US and China. The<br \/>\nexpected corporation tax reform in the US should further<br \/>\nshore up corporate profitability in 2018, even if the<br \/>\nimplementation of other reforms is looking much less<br \/>\nlikely in view of Donald Trump\u2019s dwindling political<br \/>\ncredibility. Lastly, the main central banks should start<br \/>\ncutting back their balance sheets out to end-2017, and<br \/>\nsome have already started to rein in liquidity or are<br \/>\npreparing to announce this type of move (ECB). The end<br \/>\nto US monetary expansion actually dates back to spring<br \/>\n2014 and has been gathering pace since then.<\/p>\n<p>Looking to emergings, improved global financial<br \/>\nconditions and a good showing from commodities have<br \/>\nbeen positive. But the gradual normalization of monetary<br \/>\npolicy, the progressive reduction in liquidity in dollars<br \/>\nand the slowdown in Chinese growth (which drove<br \/>\ncommodities) could drag down these economies.<\/p>\n<p>While long positions on dollars, commodities and<br \/>\nemerging equities look vulnerable among the reflation<br \/>\ntrades that have been driving the markets, others still<br \/>\nseem to harbor potential in our view, such as euro area<br \/>\nequities, which still benefit from accommodative financial<br \/>\nconditions, solid economic fundamentals (PMI at a 6-year<br \/>\nhigh) and increased competitiveness due to the weak<br \/>\neuro, which buoys corporate profitability. The real<br \/>\n\u201cjustice of the peace\u201d will be the recovery in household<br \/>\nconsumer spending, which should be bolstered by more<br \/>\naccommodative fiscal policy and the decline in jobless<br \/>\nnumbers.<\/p>\n<p><quote>In the euro area, we are still positive on themes such as<br \/>\nsmall caps, which are more exposed to the acceleration<br \/>\nin the economic cycle, as well as banking stocks and<br \/>\nItaly, which are set to benefit from the gradual increase<br \/>\nin interest rates.<\/quote><br \/>\n We also maintain our positive stance on<br \/>\nJapanese equities and the emerging debt markets in local<br \/>\ncurrencies.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Since Donald Trump was elected, investors have<br \/>\ngradually been reassured on their fears on deflation,<br \/>\ngrowth in emerging markets, and uncertainties on the<br \/>\neuro area, which had dented appetite for risk between<br \/>\nend-October 2015 and mid-February 2016. They<br \/>\ntherefore played the global reflation theme.<\/p>\n","protected":false},"author":1,"featured_media":63273,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1483],"tags":[1809,1655,2073,1651,2087,2068,1678],"_links":{"self":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/63275"}],"collection":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/comments?post=63275"}],"version-history":[{"count":0,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/63275\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media\/63273"}],"wp:attachment":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media?parent=63275"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/categories?post=63275"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/tags?post=63275"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}