Albert Edwards: The Reflation Trade May Be About To Unwind

Albert Edwards: The Reflation Trade May Be About To Unwind

Point, counterpoint, I suppose. The reflation narrative is making a comeback after taking a brief hiatus, but some think that narrative may be detached from reality. One of those people is SocGen's Albert Edwards who, on Thursday, expounded a bit on the topic. "Much of the equity and commodity world has raced higher on the back of the reflation trade," he said. "The unusually deep inversion of the breakeven curve tells us the trade may have gone too far and is about to unwind." He cited a num
Subscribe or log in to read the rest of this content.

5 thoughts on “Albert Edwards: The Reflation Trade May Be About To Unwind

  1. I looked up COPX and XME when reading the last article. Look a little toppy. Wouldn’t be the worse thing in the world if they come down to meet their 200 DMA in late March/early April.

    The bankruptcies goes against any realistic expectation. Of course, there is an explanation it would seem. Some commentators a few months ago were talking about how it would be a good time for some government entities to try the re-organization route. That doesn’t seem to be happening. So, we have to expect bailouts instead, I guess.

    Still in the deflation camp myself.

    Commercial real estate bankruptcies could become a thing soon. Second- or third-order effect if commercial real estate doesn’t get bailed out is that it’ll help the big, downtown cores recover via cheaper rents. If not the next big thing, then maybe more bailouts on the way for this sector (and cities) and downtown rents stay high…and buildings vacant. Do zombie buildings walk?

  2. Deflation camper here … my prepandemic recollection was that corporate debt was already at record highs all the way back then, now dramatically higher, same for public debt, add in the accelerated utilization and influence of the pandemic tech interventions that will remain ingrained in our new realities, sprinkle in devastating employment numbers, mix in a little urban to unprepared suburban exits…hard to see inflation for at least a couple of years…

  3. I have been reading Albert Edwards since he and James Montier were at DrKB, putting out some of the most thought provoking pieces on the Street. That’s 20+ years ago now. I love reading his stuff. That said, this is a guy whose timing can be off by years. Decades, even.

  4. The proposed slow ramp up of the minimum wage to $15/hour by 2023 could put a floor on the post-reflation deflation. If Democrats do assert their mandate, I could see voters demanding more inflation-inducing government action.

    So these zombie companies have about four years to out-earn their interest. What’s a good way to hedge this risk?

  5. GDX could be one component.
    Not a gold bug, but in the current environment with policy “normalization” being far away and more stimulus (better: much needed help) coming it’s hard to see how gold miners should not profit.
    Even IF inflation should return, gold as the classic inflation hedge stands to gain.
    The most obvious hurdle, of course, would be (rapidly) rising interest rates to fight that same inflation, but currently that seems out of question, given the propensity of CBs to “look through” inflation overshoots.

Speak your mind

This site uses Akismet to reduce spam. Learn how your comment data is processed.