Should we get off the reflation trade?

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Question asked 22/02/2021

Should we get off the reflation trade?

“Hi Guys, nice calls over the past months however a bit slow on changes. It looks like the long “holds” are over with rotation the new normal. I would like to know your thoughts on the “go to” gold sector which now seems a thing of the past with Tech stocks looking like to “go to and get out” sector for more short term growth. My feel is we have missed a lot of opportunity by holding rather than a more “in and out” or if you like short term position(s). Materials have hit highs, as have the banks so what next? Good work team but time for change I feel.” - Wayne S.

Answer

Morning Wayne,

I assume you’ve felt our frustration over the last few weeks around being too slow to sell and switching out of banks / resources is undoubtedly the easiest path to follow at present. However our core reflation outlook for 2021 / 22 suggests both sectors should outperform and while the “easy money” has gone as stocks like OZ Minerals (OZL) hit fresh multi-year highs, the question now is do they again accelerate higher or is it time for a rest. We are watching very carefully but the chart of copper below is actually implying the later.

OZL

MM are not convinced its time to take profit from the banks & resources.

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chart

OZ Minerals (OZL)

LAST UPDATED 22/02/2021 09:03

chart

Copper March Futures ($US/lb)

LAST UPDATED 22/02/2021 09:04

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