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  • The Reflation Trade Was Bludgeoned [View article]
    This is a most informative article, highlighting the challenges of investing when the market gets ahead of itself in a very complex economic environment.

    This anticipated sector rotation corresponds with classical patterns of the past in which materials, industrials, consumer discretionary and financials start advancing at the trough of ISM surveys in anticipation of economic recovery. This is typical in V shaped recoveries.

    In today's market, though, we have a situation in which the ISM data has bottomed but the economic recovery is being questioned and reexamined in the light of much doubt. Unlike previous cycles in which the uptick comes immediately after the bottom ( the V ), we may crawl along the bottom until needed structural changes take place and consumer balance sheets are repaired. This could take several years and there will be other challenges along the way.

    Looking forward, we very well might see alternating rounds of deflation/reflation investment themes recur until the reflation side is proven lasting.
    Jul 07 08:12 am |Rating: +3 0 |Link to Comment
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