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The Three R’s: Relapse, Reflate And Rebound

Alpine Macro writes…Stepping into 2019, global financial markets are fraught with risk and uncertainty. The steep drop in global equity prices since October 2018, the sharp decline in oil prices and the strong rally in government bonds have seriously dented investor sentiment, creating a heightened sense of pessimism.
However, we believe that 2019 will play out differently from how it has begun, because policy reflation is on the way. Barring major policy mistakes by the Fed, the Trump administration or Chinese policy makers, risk assets should rally on policy reflation and, eventually, an improving global growth outlook.
Specifically, the losers of 2018 could be the winners under our scenario: They’ve been beaten down in anticipation of a growth relapse, will benefit from policy reflation and should subsequently rebound.

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