Vulnerabilities of the Reflation Consensus: DB- Jan7, 2021

Real Vision: Finance & Investing

Real Vision

Business News, News, Investing, Business

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🗓️ 7 January 2021

⏱️ 36 minutes

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Summary

Real Vision managing editors Ed Harrison and Roger Hirst examine the consensus around reflation which has gripped financial markets – a narrative that Roger views as the most unanimous one he’s seen in his entire career. Ed and Roger first define reflation as a pick-up in growth alongside inflation and explore why so many market participants believe it to be a foregone conclusion. They then discuss the rush into small-caps, high yield, and low-quality stocks that has occurred as the confidence in reflation has strengthened. Ed and Roger consider everything from the yield curve to job losses to speculative positioning in copper and cattle, and they look forward to what is on the horizon for markets and the economy. In the intro, Real Vision’s Haley Draznin examines why the political unrest in Washington didn’t dent cryptocurrency or the stock market’s ongoing rally Thursday, and she looks ahead at what to expect from the job market in 2021. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Transcript

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0:00.0	It's Thursday, January 7th, 2021.
0:07.0	It's Thursday, January 7th, 2021.
0:09.6	Welcome to the Real Vision Daily Briefing.
0:11.4	I'm Ed Harrison, joined shortly by our managing
0:13.8	director in London, or actually in the UK, I should say, Roger Hearst. But first,
0:19.2	with the news of the day, Haley Drasnan.
0:21.6	Hey Ed, political unrest in Washington,
0:25.0	didn't dent cryptocurrency or the stock market's ongoing rally Thursday.
0:29.6	Bitcoin hit 40,000 for the first time ever, and all three major stock indexes rose to new all-time
0:36.5	highs, the Nasdak, S&P 500, and the Dow all climbing.
0:41.6	Investors are looking at what the shift of political
0:44.4	power from Republicans to Democrats means for the market. The expectation is that
0:50.3	more fiscal support will be available to the economy and that will then of course boost equities,
0:56.4	especially those hit hardest by the pandemic.
0:59.3	Yields on treasuries are also up.
1:01.6	Goldman Sachs too raised its growth forecast for the U.S.
1:05.1	Economy predicting output will now expand by 6.4% this year. That's up from 5.9%
1:12.4	and that's based on the assumption that Congress will now be able to pass a 750 billion stimulus package including 300 billion in stimulus checks.
1:22.4	The economic data of the day also came in better than expected
1:26.5	with lower than predicted jobless claims for last week, 787,000 Americans filing for unemployment benefits, about 3,000 less than the prior week, but
1:37.6	note claims can be volatile around the holidays, so we could see corrections next week.
1:43.0	Continuing claims for state programs also fell
	...

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