What will matter to markets in 2021

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Macro Afternoon

Global Reflation

The base case for the global economy is a growth and profits boom in 2021. This is a combination of four factors:

  • ongoing huge stimulus
  • catch-up growth
  • ongoing inventory rebuild
  • falling US dollar

These four factors will dominate growth and profits. Monetary authorities will do nothing to tighten in 2021, outside of China. All major central banks have made the intellectual leap to running their economies “hot” in an effort to revive inflation. This guarantees them sitting on their hands for the year. Fiscal authorities will keep the pedal to the metal as well, by and large.

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