Prices Will Shift From Deflation To Inflation.

Although the global central bank has spared no effort to stimulate economic growth, its effect is getting worse and worse.

Against this background, the Bank of America, Merrill Lynch believes that the baton of policy will turn from monetary policy to fiscal stimulus in the next two years, and the fight against unfair distribution of wealth is an important way for the new policy combination to exert force.

Michael Hartnett, an analyst at Bank of America Merrill Lynch, said the future policy will be the combination of the following three forms:

Redistribution.

It has a stagflation effect and will be good.

Value preservation bonds, municipal bonds, low-end consumption (retail, payment and tax services), bad brokerages, luxury goods and growth stocks.

Protectionism.

It has a deflationary effect, which will benefit treasury bonds, gold, market volatility, and high quality defensive stocks.

Keynes doctrine.

It has a reinflationary effect, especially if there are helicopters to distribute money, which will replace inflation inflation protected bonds, commodities, banks and bad debt.

Judging from the current fiscal policy of all parts of the world, Hartnett has noticed that policymakers are more inclined to "

"And Keynes doctrine, not trade protectionism, is very comforting for the market.

The report said:

In Japan, Abe Shinzo hinted that economic stimulus measures would be launched at the upper limit of 20-30 trillion yen, and the fiscal stimulus might reach 13 trillion yen, which might include raising the minimum wage by 3% and giving 15 thousand yuan in cash subsidies to low-income people.

In Europe, the growth of government spending has returned to the level before the global financial crisis.

The contribution is over 1%. It is worth noting that the European Central Bank's penalties for violation of regulations in Spain and Portugal have been cancelled in the past month.

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Hartnett said that this shift from monetary policy to fiscal policy will also drive asset price rotation.

Specifically, fiscal policy will directly focus on deflation, unfair distribution of wealth and the lack of wage protection.

If successful, it means that prices will shift from deflationary assets to "inflation" assets.

In addition, it should be noted that physical assets (commodities, collectibles and real estate) and financial assets (stocks and bonds) are now at historically low levels.

In the United States, the two presidential candidates are calling for a fiscal spending plan for infrastructure (Hilary proposes $275 billion for infrastructure spending in the next five years, and Trump also proposes tax cuts and spending on infrastructure and health care).

Note that Ethan Harris, another economist at Merrill Lynch, believes that monetary policy may be more effective than fiscal policy in the next few years.

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