Thread by @choffstein

In our latest video, @JasonMutiny and I explore the reflation trade.

- What is it?
- Where does the evidence stand?
- What trades might you consider in your portfolio?

Stuffed with graphs from JPM, GS, Nomura, and SocGen.

https://twitter.com/FinancePirates/status/1370515626100469761

@JasonMutiny A few graphs and charts you’ll see:

Consumers have a lot of savings and are feeling pretty wealthy right now...

@JasonMutiny Real goods spending has recovered, but services not so much.

So is the consumer WILLING to spend, they’re just not being allowed to?

@JasonMutiny An estimate of excess savings in the US is $1.9 trillion.

That’s 8.6% of GDP.

@JasonMutiny We’re seeing equities pricing in reopening, but mostly in the US.

@JasonMutiny There’s lots of calls for further steepening, but in the short-term, futures suggest that lots of institutions are already priced for it.

(Did CTAs exaccerbate recent sell-offs?)

@JasonMutiny Historically speaking, certain sectors tend to do well during a steepening cycle, and we’re already seeing flow disparity in ETFs (top = XLE + XLF + XLY, bottom = XLK + XLV + XLP)

@JasonMutiny Re-opening baskets correlate highly with small-cap and value tilts right now.

Interestingly, we’d expect momentum to start tilting into these names in the next few months as well.

@JasonMutiny Finally, JPM and SocGen are both calling for a commodity SUPERCYCLE.

Spot commodities, equity sectors (e.g. Energy, which is massively under-allocated), or CTAs may be different ways to play this thesis.

@JasonMutiny For more, please watch the video!

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