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“reflective tradingIt has dominated the financial markets since the introduction of coronavirus vaccines last year Federal Reserve he noted that his attitude towards inflation had changed unexpectedly.
Investors went on to buy stocks that could have inflation faster, betting that a very simple money and fiscal policy and a combination of the global economy created by the Covid-19 blockade would lead to higher prices.
However, after unexpectedly strong inflation data in recent months, earlier this week the Fed advanced guidance to clarify when it could be interest rates started to rise, and stated that he would soon begin discussing the purchase of $ 120 billion in bonds a month.
The the pivot of the unexpected central bank it has hit many of the most popular trading trades, such as smaller stocks, gold and commodity prices, and has pushed other weakened assets recently.
“The surprise hit the Fed for more risk management reasons on Wednesday through financial markets around the world on Thursday, while investors in asset markets and violent movements liquidated inflation hedges and eliminated reflection trades,” ISI Vice President Krishna Guha Evercore said.
Guha said the leveraged trade-offs of liquidation could hardly draw conclusions about the market’s views on the Fed’s change, but they could exacerbate market movements, but noted investors may begin to question the central bank’s commitment to its flexibility. inflation targeting regime.
The inadequacy of natural resources for reflection was the most successful. Bloomberg’s commodity price index fell 3.6% on Thursday, the biggest one-day drop in a year, and WTI oil fell 1.5%.
The so-called USA value stocks – which are often cheaper and less sensitive to the pace of economic growth – fell another 1.3 per cent on Thursday to extend the initial decline suffered on Wednesday on the day announced by the Fed. The MSCI’s global value index fell 1.2 percent as early as Thursday.
The Russell 2000 index of the smallest U.S. companies fell 1.1 percent – the highest reversal during the month – when the price of a two-month gold troy for $ 1,753 fell on Thursday.
Other assets have benefited, however. The Federal Reserve’s chances of letting inflation go hand in hand sparked a rally in the long-term U.S. treasuries and other securities that deflationary pressures take advantage of. very corporate valuation bonds, US dollar and a large stock of technology.
Matthew Hornbach, head of Morgan Stanley’s global macro strategy, said the Fed was also at risk of triggering another “taper tantrum” in line with the market crash that caused it, when it stated in May 2013 that financial losses would begin to disappear. incentive crisis.
“The risk of taper tantrum has increased,” Hornbach wrote in a statement. .
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