THREAD:

I am going to speak to my colleague Roger Hirst at 11:30 today for today's @RealVision Daily Briefing about what's going on in markets from his perspective. Broadly speaking, the topic will be reflation. Here are my thoughts /1

If you look at market action, it all speaks to reflation. Dollar down, equities up, bond yields up, oil prices up, gold up, Bitcoin up /2

So irrespective of whether you think this is a liquidity-driven rally or one anticipating massive fiscal stimulus or one that is forward-looking to a post-vaccine world, the reality is that it's signalling a reflation trade /3

The question is not just whether that's the right call, but also whether that trade is crowded. The short USD trade certainly is. And arguably it is part and parcel of a whole reflation nexus that now has the US 10-year at 1.08% /4

I agree with @albertedwards99 when he says we're not getting to 1.50% on the US ten-year because - to paraphrase him - 'markets can't handle it'.

Equities are priced for lowflation and low yields. 1.50% on the 10-year, only 42 basis points away is too much for this market /5

Moreover, when the B117 variant comes to the US en masse, we should expect lockdowns that will cause GDP growth to crater. /6

Yes, we can look through the data to the post-vaccine new normal that will start with a burst of pent-up demand. But, the ADP numbers yesterday showed large businesses lost jobs. To me, this speaks to market-listed companies feeling the pain. /7

So, we have both some economic headwinds and a yield curve steepening too quickly as factors which to me have the rally in shares at odds with the economic reality in market-listed companies. Let's see where this leads /end