Reflation trade is back on, via the market pricing out a 1.00% hike from the FED and a recession. So is it stagflation and a hiring boom collapse? A $100 oil price will crimp any major rallies.

Chart 1

The reflation trade has returned.  With U.S. major indices up from their June 16th lows, with the recent rally securing close to an overall average 3% rise. The S&P, Dow and Nasdaq are all closing in on their price supports, please refer to Chart 1.   How far stocks can rally on the back of reflation is up to the Federal Reserve, China and the oil price, below the chart is the 10-YR Breakeven Inflation Rate and WTI (West Texas Immediate) as the correlation between the two shows that inflation has not abated, by any stretch of the imagination.   What the market is doing is pricing out a 1.00% rate hike by the Fed and pricing in a 0.75%, whilst downplaying (correctly) that the U.S. is not in a recession.  It is however at the cusp of the worst stagflation in history.  

What the 10-YR Breakeven Inflation Rate and the Oil price are telling, is that the market will be muted in its rallies and become anything what it used to be i,e underwritten by Central Banks at the cost of company profits going backwards.  Systemic of three decades of monetary policy that was to offset recessions.     Rather, when the so called global hiring boom, which has been mostly white collar jobs, with reduced hours for all 'other' employment, comes to an end, which could be months away as earnings are stripped by inflation.