This”Deflationary trade“Financial institutions that have dominated financial markets since the emergence of the coronavirus vaccine last year have been hit hard after the outbreak. U.S. Federal Reserve It unexpectedly showed that its stance on inflation has changed.
Investors are eager to buy securities that may benefit from faster inflation, betting that unusually loose monetary and fiscal policies and the global economy due to the Covid-19 blockade will cause prices to soar.
However, after the unexpectedly strong inflation data in recent months, the Fed moved its guidance earlier this week Start to raise interest rates, And said it will soon begin to discuss when to reduce the monthly bond purchase scale of 120 billion US dollars.
This Unexpected central bank pivot It has already hit many of the most popular reinflation transactions, such as smaller stocks, gold and commodity prices, and boosted other assets that have been weak recently.
Krishna Guha, Vice Chairman of Evercore ISI, said: “The Fed unexpectedly turned to a tough attitude on Wednesday on the grounds of risk management, which caused repercussions in global financial markets on Thursday. As investors cleared out inflation hedges and currency The re-inflated transactions faded, and there were violent fluctuations in and out of the asset market.”.
Guha said that the liquidation of leveraged reinflation transactions makes it difficult to draw definitive conclusions on the market’s perception of the Fed’s changes because they may amplify market volatility, but he pointed out that investors may begin to question the central bank’s new and more flexible commitments. Promise of. Inflation targeting system.
Natural resources have been hit hardest by the reinflation trade liquidation. The Bloomberg Commodity Price Index plunged 3.6% on Thursday, the biggest one-day drop in more than a year, and WTI oil prices fell 1.5%.
The so-called America Value stocks -Usually cheaper, unpopular companies that are more sensitive to the rate of economic growth-fell another 1.3% on Thursday, continuing the initial decline on Wednesday when the Fed announced the news. The MSCI Global Value Stocks Index fell 1.2% on Thursday.
The Russell 2000 index of small American companies fell 1.1%-the biggest reversal in more than a month-while the price of a troy ounce fell to a two-month low of $1,773 on Thursday, and then narrowed its decline slightly on Friday. .
However, other assets also benefited from it.The possibility that the Fed will let inflation run out of control gradually diminishes, which helps trigger a rebound in long-term U.S. Treasury bonds and other securities that benefit from deflationary pressures, such as High-rated corporate bonds, This U.S. dollar And many large technology stocks.
Morgan Stanley’s head of global macro strategy, Matthew Hornbach, said that the Fed even risked another “scaling panic”, just as it stated in May 2013 that it would begin to scale the market turmoil caused by the financial crisis. same. Crisis stimulus.
“The risk of cone-shaped tantrums has risen,” Hornbach wrote in a report. “The hawkish shift… the evaluation of appropriate policies raises reasonable questions about the timing and speed of the reduction and the rate of interest rate hikes thereafter.”