Markets have mispriced a reflation trade once more, as Central Banks begin to throw in the towel on taming inflation. Oil and commodities prices begin their incline back to early 2022 levels. Markets still can't read stagflation.

 

The echo of the 2021 reflation trade has come roaring back, as Central Banks once again begin to throw in the towel to combat inflation so far it has been the Bank of England, Reserve Bank of Australia and of course the European Central Bank, while hoping that inflation has peaked out.  This on and again off dovish to hawkish rhetoric while awaiting economic data, the High Frequency Trading systems have been quantified to only look at recession cues to buy in.   Ala, declining jobs openings, manufacturing slowing down or unemployment rising.  Of course the stagflation manual of forty years ago has not been dusted off, otherwise we would have rates at over 5%, rather than relying on hope.  So, when 'recession' is seen in the data, the market will rally like no tomorrow.  Remember it is still a heavily institutionalised market place i,e underwritten by Central Banks.

Main juice for the recent market rallies: 

• Job openings down in the U.S.  https://www.bls.gov/news.release/jolts.nr0.htm
• Reserve Bank of Australia goes 0.25% rather than market consensus of 0.50%
• Bank of England prints money to manipulate the yield curve.

And finally my stagflation trade (oil price) above charts says it all.  From $81 (2022/10/02) to $84 (2022/10/04) on its way to the $90 resistance.  

The amusing and tragic question has to be asked: Are we expected to live with stagflation?