"Do the times make the man - or does the man make the times?"
If we're reading the rules right, at this point in this existential zero sum game of disinflation, deflation and reflation - both Xi's manifesto and Bernanke and Yellen's taper talk - trump Shinzo's Abenomics.
For those not following at home:
- The dollar has historically declined when the Fed moves to constrict extraordinary monetary policies.
- Japan has tangentially expedited disinflationary trends overseas in the past year through a weakened yen. We expect that trend to reverse.
- China is breaking out of its long-term consolidating range. World-wide growth should accelerate, as well as broader reflationary trends.
- Commodities, commodity currencies and emerging markets should benefit disproportionately from China's reemergence.
Hopefully for Dr. Yellen she receives the Volcker treatment.