Is the reflation trade already priced into markets?

Investors are betting that US stocks will lead the way as the global economy rebounds from Covid-19. But if you truly believe in the reflation trade, there are better ways to play it, says John Stepek.

New York Stock Exchange
US stocks are overpriced
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We pride ourselves on being contrarian thinkers here at MoneyWeek. But I have to admit, it seems that our view that we’re heading for reflation next year, doesn’t exactly go against the grain. In fact, investors generally are uber-bullish right now. So should we be taking the other side of the trade? Let’s see...

In his Bloomberg email this morning, John Authers flags up an important issue that quite a few people have been raising in recent weeks. It's this: there is a very strong consensus around the reflation trade. Investors are exceptionally bullish for the year ahead. It is not a minority view. Indeed, it is anything but.

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John Stepek

John Stepek is a senior reporter at Bloomberg News and a former editor of MoneyWeek magazine. He graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.