Barclays Capital today said in its latest flagship quarterly research publication, Global Outlook: Don’t Fight the Reflation Trade. The report recommends long positions in equities and minimal exposure to government bonds, but cautions investors to watch for signs that central banks are losing enthusiasm for reflation, which Barclays Capital expects to happen later in 2011.
“The environment looks quite favourable for equities now, but as we proceed through 2011 investors need to be alert to a change,” said Larry Kantor, Head of Research at Barclays Capital. “Overstretched valuations may provide that signal, as might central banks in emerging market countries as they pull back from extremely supportive policies over the course of 2011.”
Additional themes of Barclays Capital’s Global Outlook include:
- Current environment favours commodities and credit, although absolute credit returns could suffer from higher interest rates
- The reflation trade bodes poorly for government bonds, especially considering the unusually high levels of sovereign debt in the developed world
- European debt problems have not been resolved, suggesting investors should be long volatility and implement strategies to protect positions from possible sharp reversals
- Easier monetary policy suggests a weaker dollar; appreciation pressures will be concentrated in European and especially commodity and emerging market currencies
About Barclays Capital’s Global Outlook
The Global Outlook research report, published quarterly, provides an assessment of all major economies and outlines the likely implications for global financial markets, including commodities.Bloomberg during the last hour has broadcast this so small investor if you are thinking of entering the stock market take note
