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Reflation on its way; buy risk assets
Uncertainty about Fed interest policy and reactive measures by other leading central banks confuse investors. Where should they allocate their cash if policy makers give unclear signals and the economic runes are so mixed?
Step forward the strategists at Société Générale to part the mist.
“Inflation risks are set to re-emerge on the back of reflationary policies in many areas. Even in the US, monetary policy normalization should be subdued and the Fed is expected to remain behind the curve, triggering inflation risk. Inflation should also be supported by a turning point in commodity prices,” write Alain Bokobza and Sophie Huynh in a report out today.
Last month they told investors to “buy risk on dips”.
Their view was predicated on the Fed acting softer than expected, the ECB would implement QE2, the Bank of Japan would signal further loosening and China’s policy makers would ease both monetary and fiscal policy.
“We maintain our view that one should be invested in risk assets in order to continue to benefit from a synchronized global reflation process across the four biggest regions of the world,” they say.
“2015 will be a great year for euro area assets and we maintain keep full weightings on both peripheral bonds and peripheral equities.”