What do markets believe?

The November 2016 election gave “birth” to the “reflation story”. There was a lot of excitement, with long-term yields, the dollar, stocks and inflation expectations all rising. But this is illusory. Since mid-2014, the economy was testing new depths. Soon after Janet Yellen took the helm, the Fed embraced the “tightening talk”. In late 2015, it even went ballistic, raising rates for the first time in 10 years and saying it expected rates to increase at least four times during 2016. The market reaction was a “bloodbath”. That forced the Fed to turn tail, so in the spring the markets…

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