The Reflation Trade 2.0

20 May 2020

The Reflation Trade 2.0

"There is no benefit from a trade that ensures that everyone loses. A bet on the end of the world is a bet against yourself"

For a 2^nd time in 9 months I am faced with a similar setup in the macro environment along with what I sense is the similar extreme in sentiment despite the recent recovery in equity prices. By recent recovery I mean from the March bottom to date. The sentiment as captured by classic technical indicators is not where it was at the start of April’20 or the end of August’19, but some indicators are getting a little oversold. All this while the world is trying to stimulate their economies out of the crisis and starting to reopen business from the lock down. One radical measure of the recent sentiment is Google searches for things like bear market and Bear Market as captured in the chart from @MacroCharts on twitter.

What really caught my attention last night, and has been on my mind for a while, is the potential impact of all the measures that are being taken in the medium term and what it means for financial markets. This can be tricky if you get caught up in the economic discussion of the short-term which is more or less known to everybody. If you have a lock down there is no business to report on GDP numbers will appear gross. This is an exogenous event that has ensured that earnings numbers are not going to look good for now. The poor numbers also ensure base effects on future positive data but not the certainty that you will go back to the same level of business. Monetary and fiscal action is on the other hand are being put in place to make up for the difference even though public confidence in them is lacking.

Monetary action in India has been substantial if you simply go by the data shown on this chart in terms of actual RBI purchases resulting in balance sheet expansion. So liquidity is clearly not the problem anywhere in the world. [chart courtesy capitalmind.in]

Fiscal action is being attempted by everyone to the extent that they find feasible and can get approved for future budgets without creating a solid in crisis.

To understand the opportunity in the market you have to look outside the coronavirus and the medical crisis at what was happening to the economy and the plans that are already in place to deal with that.

This then takes me back to my bullish trade from September 2019 to February 2020. The call in September was for either a retracement of the post more the 2.0 election correction or a move towards the trendline of the previous highs near 12,400 for Nifty. After that was achieved the only thing that could keep it going was the parallel theme of that period that I was using to stay relatively more bullish. The theme was the reflation trade driven by a weak dollar rising commodity prices and emerging markets lows.

The reason to pay attention to this dates back to the top in the dollar index in January 2017 when it touched 103.80. I called that top with the simultaneous bottom in gold prices that had touched $ 1050. That was the 1^st time I added metal stocks to be value wave investment list and in the subsequent year the metal index went up 4 to 5 times. That was reflation 1.0. Among many charts I have shown the one below where you dollar index was presumed to follow 7 year and 9 year cycles between bearish and bullish periods alternating with each other. This meant that starting 2017 we should be looking at 7 year bear market in the dollar index.

What I was not anticipating is a more than 61% retracement of the 1^st leg down in the dollar that ended in 2018. Observing the ending diagonal in September 2019 I considered it the final retracement top for the dollar index from where a major third wave down might begin. That’s all was also accompanied by the fed’s entry into the repo market in October 2019 and the trade was set up to play out.

While all this was going on it was important to keep in mind that between 2018 and 2019 economic growth had come to stall speed across Europe and Asia and was on a downward curve in the United States as well. The only thing keeping up US stocks was this monetary stimulus from the Fed. It was also observed that monetary policy was not enough to stimulate growth anymore and individual governments needed to step in with fiscal policy. Consensus on this was lacking and therefore despite expectations many have not yet implemented plans on this front.

In India even after the tax breaks given in September it was not followed up by expansionary fiscal policy in budget 2020. These actions would have probably taken the reflation trade to another level but the gap between economic growth and monetary policy caused equity markets to start rolling over and the dollar to start rising. Metal prices too give up along with commodity prices like oil that were unable to go past the $ 65 mark. All this was already in place by FEB 2020 where the pandemic took centre stage and pushed all these indicators and markets into full speed downward. Meaning that already weakening equity markets on the back of slow growth speeded up on the way down especially in Asia and Europe. The US market eventually gave up. And most importantly the dollar that signals monetary reflation started rising from January itself especially against emerging market currencies at an accelerated pace driving money out of both equities and bonds in EMs. This sent us back from an inflationary stance to outright deflation. Some of my long term predictions of oil coming back to $ 20 or breaking that to head towards $ 10 are now already part of financial market history. Commodity prices also have gone back to where they were close to in 2016. In short a deflationary cycle in the currency and commodity markets has already played out in the recent equity market crash.

In order to keep the dollar from going past the hundred Mark the fed has now put in place almost $ 4 trillion worth of bond purchases including its entry into the junk bond market. In short the crisis sent the dollar index above the high made in Sept’19 making it look like the bearish view on the dollar is wrong. The US Feds intervention however put a cap on the dollar rally. Since then it has been gyrating for several weeks in what now clearly looks like a triangle formation especially in its major component the EURUSD seen below. A triangle is a consolidation pattern but sometimes it may occur at the end of a trend in result in a trend reversal. The Euro is the largest component of the Dollar index and therefore an upward trend here means a downward trend in the DXY above. I am taking this as a sign that wave C down in the chart above is starting for the Dollar.

In the case the dollar tops out after a very deep retracement it will still be wave B up and the next decline will be a major 3^rd wave in wave C that could last for years. The dollar has therefore taken its own time in setting itself up for the next bear market and the extreme monetary action is probably going to ensure a sizeable move lies ahead. Fiscal actions that governments are now willing to take to get growth back will simply add fuel to the fire.

The fire in my mind is the opportunity that a weak dollar environment brings. In the past like the period from 2001 to 2008 it meant monetary flow into commodity prices and emerging markets that became growth hotbeds. The difference this time around though is that many emerging markets are not in the same shape as they were before with much higher debt levels. Even then a falling dollar would provide them relief because every time the dollar goes up most Asian and emerging markets end up in a crisis. We saw that in 1997 with the South East Asian crisis and in 2015 with several emerging markets from Brazil to Russia coming under pressure. There is an old saying that if you create a lot of money it has to go somewhere. If in a high debt environment growth does not pick up it will make equity investments look less attractive relative to commodities and commodity producing economies or companies. This reflation trade would then be set up for a 2^nd time since 2016 and could end in either stagflation or hyperinflation. The 2^nd scenario, hyperinflation, may appear less probable because of the high debt levels in the world. Any serious spike in inflation would eventually drive up interest rates and pop it from going too far. Therefore, the best result to expect is some level of higher inflation that can appear as stagflation in the in the in the end. Stagflation is not good for stock prices but can be very good for commodity prices and by that extension commodity producing stocks. 

For those who do not get why I am explaining all this lets look at simple relationships on charts. The dollar falls commodity prices rise and if the dollar rises commodity prices fall, as measured by the CRB index of commodities and can be seen below. 

Next if you understand Dow theory then you know that at some major market turning points two correlated assets may diverge from each other not in the short term direction but the medium term higher highs and lower lows that they make. This gives advance warnings of a possible trend change due to what we call non confirmation. The chart below shows that the deflationary crash in the CRB index seen in the recent months on the back of especially Oil, was not accompanied by a new high in the Dollar index despite the above relationship. Something similar was there at the top made by gold and copper in 2011 when they made an all time high not confirmed by a new low in the Dollar marked on the chart below. Such divergences are a warning, as it is now that a major reversal is on cards.

I was early to call the low in metal stocks in September even though some of them did rally into January especially steel stocks did exceedingly well. In the end all of them have broken those lows to complete wave Z of a complex correction from the 2018 top. In September they had reached wave Y and given the ending diagonal in the dollar index I thought you would probably not reach point Z. Now that we have completed wave Z down it gives me an even stronger reason to make the case for the reflation trade that can potentially create big winners in the metals space once proven right.

A longer term chart of the Nifty Metals index shows a likely triangle pattern, each rally in the metals index saw 3-4 times gains by just going from the bottom to the top end of this range. This is the conservative scenario. If a full blown commodity cycle kicks in then we may breakout to all time highs in a bigger bull run for the sector. Odds are open for both. What I like is the low risk at these levels. Reward we can deal with when prices get there and we can monitor all the factors that we discuss in this report to know if the theme is still active.

Simultaneously what also happen in the last 2 days is the ending pattern on the US 10 year bond yield completing. The ending pattern is visible on even the 5 year and 30 year bond chart. In some cases it looks like a symmetrical triangle and the others it looks like a clear wedge. You can see it in the bond prices and the bond yield charts. In some there is a clear breakout as in the chart below of the 10 YEAR yield itself. The direction of bond yields is also associated with the risk on/risk off trade. Below is the chart of bond prices at the end of a 5th wave, and if they decline, yields go up.

When the Fed started QT equity markets panicked and started to sell off causing money to chase bond prices higher and bond yields to go down. This environment is a risk off environment where stocks go down and bonds go up. This has been going on since 2018 as seen on this chart with the rising pink line. Now as equity prices were rising bond prices were flat for weeks not confirming that the rally was real. So the capacity to take risk was missing. But as fear starts to erode and people become willing to take on more risk in markets they will sell bonds and buy more stocks. The chart above is on the verge of confirming this possibility in the coming days and I will write about it.

Let me spell it out clearly once more. The reflation trade is a risk on environment that starts with the falling dollar on the back of easy liquidity coming from various sources. The easy liquidity then drives up asset prices especially commodity prices and precious metals. The liquidity will also chase up emerging markets and other risk assets. Most asset prices will rise if some kind of economic growth companies it. Bonds fall as safe haven money moves out of low risk bonds to buy riskier assets. However if economic growth is lacking we end up in stagflation an environment where inflationary sectors may do well but most others may eventually get hurt as interest rates have to be raised to contain the onset of inflation. Inflation also causes price pressures in the form of rising wages that lead to tightening profit margins for companies resulting in lower or negative earnings growth. Thus stagflation is bad for stocks in the end.

What is important to understand the is that all this does not happen at once. In the beginning all asset prices may move up till the point that inflation numbers actually show up. Note we are starting at the bottom end of deflation and oil prices bouncing back from $ 10-$ 30 almost threefold does not really bring back inflation. In the short-term rising prices will signal normalcy returning to equity markets and possibly the economy. It is only much later where things can get out of hand and cause a deviation between equities and commodities. Low levels of inflation may not be the problem but persistent inflation at elevated levels can be, even if it is not hyperinflation.

I cannot claim to know everything exactly as it will happen in the coming months or years. But once we have a trade setup we know what to track and which elements to look at. And in macro market analysis you will either start with the bond market or the dollar and everything else then needs to link together with what is happening in this space. If the dollar truly started a 7 year bear market in 2017 then that was the 1^st wave down. The 2^nd wave up has been a long and painful grind because it is almost a year since the dollar index completed a 50% retracement of the decline and has been grinding slowly higher keeping the fear of rising dollar at the top of everyone’s mind especially in the hedge fund community. A change of view on the dollar’s fate towards a continuation of the bear market will therefore change the trade for many participants and eventually all the new liquidity will chase up alternate asset classes in the months and years ahead. These include precious metals and commodities, mining companies and EM currencies.

In short I’m calling for an end to the deflationary cycle of the last many years and a switch towards an inflationary cycle in the years ahead till proven otherwise. The 1^st signal will come from a breakout in the EURUSD which is happening as I write. That accompanied by rising prices of base metals and oil started a few weeks ago. Precious metals may pause for corrections because gold has already been rising in a risk off environment and therefore might actually give up some of those gains initially as the asset allocation move back towards riskier assets. Silver has crashed too much like Oil and might have a lot of catching up to do so it might move up with industrial metals. But as real interest rates are negative again that is the ultimate trigger along with the falling dollar for gold prices to accelerate. Gold and silver are also a part of the reflation trade and will eventually sync in. Only higher interest rates can put an end to this. There too it is a cat and dog game beyond a point of time if allowed to persist.

Let me call this the Reflation Trade 2.0.

I have been on top of the gold bull market and dollar bull and bear so far. Other commodities remained in a bear market but might be about to turn. So if you are a low risk low Beta investor you like the hard metals or hard commodities in your hand. but the higher risk reward comes from metals and mining stocks that go up much more being leveraged bets on the production of those metals. While I have already discussed the metals index above being at a triple bottom since 2009, here is a look at the HUI or gold bugs index, an index of gold mining stocks. This index was under performing relative to the gold price for very long for some unknown reason. Some say its because of the consolidation in the sector, others at times reasoned it to be changes in components of the gold mining ETFs that caused selling in some stocks. Maybe it was just that people did not believe in the gold bull run. In March 2020 gold and gold mining stocks sold off sharply as margin payments on stocks caused a knee jerk reaction. That ended up being the last sell off to the low end of what looks like a triangle in the HUI. Right after that prices of gold mining stocks have more than doubled. The HUI index has broken out of the triangle and surpassed the 2016 high this month. This marks the start of a more trending phase of advance for the gold and silver mining sector. It should be impulsive and last for years along with the rise in precious metals. These stocks usually rise 3 times the pace of the gold price. So you get a higher beta factor.

Get a longer term perspective of risk from the Barrons gold Mining index updated till Jan 2020. 

Same index on a log scale back to 1940-2018 shows you the long bull market in miners from the end of the previous deflation in the 1940's. Another cycle maybe about to start if the deflationary cycle is behind us.

The gold silver ration probably made an all time high because of the knee jerk reaction in Silver seen in March where it broke the 2015 low even though gold did not. That surprised me as well. I did not think it would after gold bottomed in 2015. This has made silver even more relatively attractive than gold on a long term basis. Silver catches up when least expected and especially when gold slows down. This provides interesting opportunities to short term traders. The long term returns of silver are also 3x gold prices because of the higher beta. But in the near term not every rally in gold sees silver outperform. Then it decides when to do so.

If you are directly studying the risky gold and silver mining space here is a list of stocks I am studying listed on NYSE. Codes PAAS, AG, SSRM GOLD, AU, FNV, SAND. There are no good gold miners in India that I can think of. As far as metal stocks in the area of base metals are concerned think of all the big names in the metals index in steel, copper, aluminium, zinc etc. I cover the long term wave counts of all of them in Value Wave Investments for your reference and have updated them recently.

How can you play the gold mining space without opening an account with a US broker? There is a fund of fund that invests in them that I have written about since 2015. DSP World gold fund [chart below]. Then the NAV was 8 and later it hovered between 10-15 for a few years. But in the recent volatility it has managed to spike up to 19. Similar behaviour like the HUI above. Only difference is that the value of this fund declined much less then the HUI and is probably higher now. Reason? USDINR. Because the investment is in dollars in US stocks you get the benefit of the currency as well. The wave count shows that wave 3 of 3 maybe in progress here. This is a weekly chart.

But what about the Indian Stock Market?

Yes Nifty is important especially as all the above bullish opinions are hard to digest if the stock market is in a bear market rally and everything is going to crash again. This is the view I have heard over and over again on social media and from everyone that I am concerned about it. An opinion that is so widespread is either fully discounted or will take time to play out.. So far I am sticking to the idea that we are in wave B of a counter trend bounce. A normal wave B bounce means a % retracement of the entire 40% decline we say from the Jan top. My levels though are from the lower high in FEB at 9880 and 10430. The first was achieved and the second I still think is on the cards as momentum and sentiment measures have not recovered from the depths of the crash. The best case in this scenario is 61.8% of the entire fall at 10560.

The second alternate however is that this is not a normal B wave. If the Reflation trade does kick in at scale with all the government intervention then no one today is open to the idea of wave B leading to a near double top or the rare case of an expanded flat. So after 9880 I am still waiting for one more leg up. But should I turn outright bearish at 10430-10560 this time. I would at least be prepared to do so. But if by then it is apparent that the reflation trade discussed in such detail has legs then rest assured wave B will overshoot the normal expectations because of record liquidity injections then consider wave B as a double top near the 12000 mark again or the most outrageous case of an expanded flat where wave B=A*123.6%=13600. I am not saying this will happen but if we get past 10560 be open to it then.

If we under estimate the impact of global liquidity then we would not expect or believe what is happening to the Nasdaq Composite that has retraced more than 78.6% of the fall already and is fillin the gap left behind at the FEB top. It can go back to the trendline of the highs near 10500. This despite the highest cases reported worldwide and a crash in GDP and employment. The only reasons can be sentiment aided by record liquidity measures.

In the case of Bank nifty we can start the same way draw a channel and expect up to 23500 or the 50% retracement mark at 24500 or the 61.8% mark near 26375. At this moment most will not even agree to anything more than 50%. The sentiment against Indian banking is as worse as I have seen. It could mean a prolonged period of under performance. So I will leave it there. But in terms of wave count this is a valid alternate. The entire decline instead of being a clear 5 waves can be a complex pattern W-X-Y-X-Z and completes one leg of the bear market. We start with this presumption.

But start thinking about this. Financial intervention is a late stage event. Usually after the damage is done. Did US markets keep falling after QE and bailouts. After Lehman was allowed to fail yes. That like saying after ILFS was allowed to fail. As of now the RBI has guaranteed all banks with its statement in March that no bank will be allowed to fail. The govt has recently provided for credit lines for all with government guarantees and announced a halt to insolvency proceedings. You can read that as losses being postponed or being written off. But the optimist would see the intent of ending a crisis. European banking faced a crisis many years ago and is still around and their markets have risen on liquidity over the years. This is a brave new world. So our bullish and bearish stance has to account for both sentiment and fundamentals. And right now sentiment is too bad to bet on. Meaning markets are not irrational. This does not make for good shorts. Even if banks do not make new highs they can bounce back and remain elevated for longer than we think logical even at lower highs then the Jan'20 top. So be open to scenarios based on the trend and sentiment.

Everyone understands the narrative that the world economy will not go back to levels seen before and so this will lead to a financial crisis going forward and therefore any market rally will not last and is going to crash even more. You Tube is full of it. Maybe it is true, but it does not discount the record actions by central banks and governments knowing this to counter it with equal force. It has been presumed that it will not work without allowing the markets to discount to what extent there will be a positive impact before things start failing again. This in between is where the opportunity is for now. Watch out for momentum and sentiment to go higher and roll over before the next crash is what I would expect. The extent depends on the impact of these policies and the FOMO crowd joining in. The FOMO crowd better known as "Fear Of Missing Out" buyers that will enter after realizing that they missed out buying at 7500.

The only other sector I have covered since March as a potential turn around longer term has been Pharmaceuticals. This theme has quickly been taken on by most fund houses as well. After a 3-4 year bear market this sector has turned a corner and the crisis highlighted its importance. It is also a defensive sector historically as medical consumption never goes down. So that will be my largest exposure outside metals and mining and precious metals. The BSE Healthcare index broke out of the downward 4th wave channel above 15300 recently. This was wave 1 and wave 2 maybe complete on daily charts. Wave 3 is now starting. This is part of a long term 5th wave that should then go all the way to the top end of the rising channel near 36000 or higher as it takes more time.

There could be other themes as well that I might miss out as I do not cover every sector. But clearly the next recovery might not yet be broad based. Value investing will make a comeback as good beaten down stocks get attention again. The relative strength of the Midcap to Large cap indices has actually not fallen much in the last 9 months. Between 10600 Nifty in Sep'19 and 7500 in March'20 the RS chart shows a near double bottom. This means that in the recent fall Large caps were much bigger losers than Midcaps that had already taken a beating in the last 2 years. So did large caps just catch up with the midcaps and that is it? Now both are down and we have to start thinking about what can drive both up.

The BSE Midcap index on a quarterly chart fell back to the lower Bollinger band and the lower end of the reverse parallel channel. Meaning first draw the trendline of the highs and then take a parallel line below for support. It did not go below the 2011 top and overlap. The quarterly momentum that was in sell mode is now back at below zero. The down cycle therefore is complete on this ground. A break of the channel could accelerate it. But on the contrary if it holds we get a swing higher.

One trigger that everyone maybe missing is the possibility that interest rate transmission is finally showing up in some places. In the recent weeks cases of commercial paper being issued at 3.5-4.3% for 3 month tenure is a sign that some financial intermediaries are able to raise money at the low end of the rate curve. If this becomes more widespread you can give RBI some credit for its record OMO and LTRO operations finally showing fruit. Lower rates will also put to rest the doubts people have about credit off-take from the governments newly announced plans. As interest costs come down it creates room for existing borrowers too to add to their working capital lines to get past the near term pain without raising finance costs. Similarly the Indian bond yield chart shows that yields have been kept from rising. Even at the height of the crisis when EM bonds did start crashing for a while our 10 year yield did not cross 6.5%. Now we are back at 6.04% on the 10 year GSEC. Lowering rates was a strategy that was used aggressively after 2000 in the US. And we know there is a trigger point at which after rates fall, credit picks up again and gets economic demand moving at some degree. You can argue that this is not good long term, and I agree. With our debt to GDP public+private combined at nearing 170% we are going for a moon shot. Corporates borrowing more means that corporate debt to gdp now at 70% goes to 100%. Sets up for an even bigger crisis than before. But this is the path followed by the European Union and US and before all by Japan. Now if India follows up on it we get similar results. I would prefer that bad loans get resolved and we start fresh but I am not in charge. So if this is what we do lower rates then we get higher asset prices simply on valuation models based on interest rates. As return expectations go down you are willing to pay more for assets. This can create bubbles but that is what it is.

This policy will be considered failed when rates cannot go down anymore and start rising for some reason. How about when stagflation hits. that is when it goes in reverse. For now watch what yields do as they can trigger more upside than we anticipated to start with, if it becomes the reason for credit to pick up.

Let me at this stage visit my long term wave count on the 10 year that kept me bearish on equities and state that the Economic winter is not over. This chart shows a potential triangle in which we are in wave D down. the lower end is near 6%. If we bottom here then it would indicate that yields rise in one final spike in wave E up toward 9.5%. That could be a trigger for the next crash in stocks in wave C down. But there too it does not happen all at once. As seen in 2018 markets reacted to that only in the last part of the rate rise. Then the government stepped in after the ILFS crisis and yields went down again. Now was the 2018 top in yields a truncated wave E of B and we are already in a bear market for yields? Or do we have that spike pending in a last panic on bonds? 6% might be the Lakshman Rekha on that. With the RBI active now betting on the bump up on yields without an larger force to act against it might not be wise. We are at a critical point for the Indian bond market then and this needs to be closely watched. The short term chart above looks like the impulsive decline wants to extend yields lower so lets see if that happens. It would be a bullish trigger.

The falling dollar also helps here as it reduces pressure from foreign investors selling bonds. The chart of the EM currency index below shows that after a 5 wave fall prices are trying to pullback. Multiple bottoms have been made. I have written 1 or C. Wave C = A was not achieved so I am keeping it open for wave C to extend. But if this is a major dollar bear market we may have to later conclude that wave C down was truncated. So till this index starts declining again we have a risk on environment that favors EMs.

Despite this I will not change my bullish long term view on the USDINR as each chart is on its own. I will open up an alternate just in case. First sticking with the current view we are in wave 4 of 3 of 5 long term. This may pull back to 38.2% retracement or the 20 week average near 74 before going up again. It is possible as seen once last year that USDINR and Nifty go up together given the RBI intervening in debt markets by buying bonds and creating more currency. For this reason the bull market in the currency pair stays. But near term we get stronger or consolidate. So we are still looking at wave 5 of 3 going to 80-81

The long term wave count from the 2008 bottom has been a 5 wave rise inside a nice channel. We are closer to the lower end of the channel.

The alternate scenario is a little wild but given that the move so far is exactly 138.2% of what I have marked as wave A it is a valid wave count. Wave C would then be 161.8% of A and go below the low of A before complete. This is what we call an expanded flat correction. Consider it only if the weekly averages break. Till then 74-73.60 should be the bottom end.

The Long term chart for gold shows an ongoing bull market and the pullback expected in wave 2 was small and held the previous swing low of 1450. So it is best to think that wave 3 up started. It will subdivide along the way but should eventually mean going to all time highs. 

Silver did a surprise break of the 2015 low this March. But compared to 2001 this is exactly what silver did back then too. The 1997 low was broken by silver but not by gold when the dollar made its last spike. This caused an inter market divergence on long term charts between gold and silver and marked the take off point for precious metals and the reflation trade of 2001-2008 a 7 year bull market. Now we have a similar inter market divergence between gold and silver where the 2020 low in silver is not accompanied by a new low in gold. This is an even more bullish sign for precious metals in the year ahead. Silver itself should race past the neckline of the two highs during this period at 19.75 and go much higher eventually. Silver's bull market should in the end catch up with gold at an all time high.

But this undervaluation of commodities has not been the case only for precious metals. This chart shows the ratio of the commodities index to US equities historically. These things take time to play out as they are long term but once it starts it is a trend. A similar chart from Incrementum AG has been floating around for the last few years.

This can be seen in copper and other base metals that are back near 2016 lows, or taking support on long term channels. In case of copper we have a near double bottom with the 2016 low of near 1.9$

Conclusions

The equity bear market rally might not be over and will see higher retracements in wave B before wave C down shows up. The falling dollar on daily charts if further confirmed on weekly and monthly charts is indicating the restart of a bear market in the dollar, and that can trigger a Reflation trade. This is bullish for Commodities of all kinds base metals precious metals and agro commodities. It is bullish Emerging market currencies bonds and stocks till where interest rates and inflation become a problem, thus stagflation. Lower interest rates, if persistent and held down lower than ever before, can stimulate demand in India. Watch if the 10year goes below and stays below 6%  for this as it can change things longer term.