Morgan Stanley believes that i) a global synchronous recovery, last seen in 2017, will unfold in 2021; ii) Emerging Markets will "board the reflation train" and iii) an inflation regime change in the US which pushes core PCE inflation to 2% in H2 2021 and sustainably higher from in 2022.
"There is certainly elevated chatter that potential shutdowns in the U.S. will weigh more in the near-term and maybe so, but investor sentiment is the most elevated since 2017."
"Our investment decision had been based on the belief that triple-A rated state firms are safe investments regardless of their fundamentals," said the chief ratings officer at a Shanghai-based bond fund. “That’s no longer the case."
"The challenge for investors is that, with a divided Congress and appetites for budget austerity rising in both parties, 2021 could also become a record year via the fastest and largest fiscal contraction in history."
...unlike 2018 this time central banks everywhere are being fully exposed... while the leveraged specs bet on Jay’s narrative, everyone else in bunds and bonds are betting on the shadows. Again...
The paper concluded that selling a security after a "herding event" and then buying it back five days later would deliver a 3.5% return consistently... where the "herding event" was more extreme, the returns were "nearly double"...
Moves like the one we saw on Monday cause every manager to question portfolio positioning and take a deeper dive into whether Monday’s action was the start of the oft-mentioned “value” rotation...
Lessons for today: first, technology has a long history of driving structural deflation and second, global reserve currency status lasts for a long time.
A considered reflection of current events leads to only one conclusion, and that is accelerating inflation of the dollar’s money supply is firmly on the path to destroying the dollar’s purchasing power - completely...
