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Morning Notes — Tech, Positioning and the Pain Trade

Tech, Positioning and the Pain Trade

November 23, 2021

The sector with the least crowded positioning at the moment also happens to be a good inflation hedge.  Underinvestment in the Energy sector is the understatement of a lifetime. And if Tech is the primary sector beneficiary of disinflation, Energy is the primary beneficiary of reflation.  Over the next several months, we expect inflation will decelerate but remain elevated.  A sustained global recovery will allow central banks to normalize policy, ultimately resulting in higher real yields…something north of -0.88. If portfolio managers reposition for reflation, the combination of low market liquidity, systematic flows and the sheer size of financial assets needing to be rotated could cause material upside in energy equities.  

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