The “War On Inequality” Is Coming To The Stock Market: Three Ways How To Trade It

According to Bank of America’s Michael Hartnett, in the coming quarters – especially in the aftermath of the shocking wake up call to the “establishment” delivered by Brexit, one which forced even McKinsey to declare a stunning U-turn on the think tank’s favorable opinion on globalization – investors must prepare for policies to address inequality. BofA believes that there are three ways to trade market “populism”,
From BofA’s Michael Hartnett
We believe the BREXIT vote was the biggest electoral riposte yet to the Age of Inequality. We also suspect the prospect of further electoral success by populists is quietly spurring governments and the corporate sector to activate fiscal stimulus in 2016 to appease voters. Telling examples: Japanese infrastructure spending, a new UK industrial policy, and announcements of higher minimum wages by high-profile US companies. Markets may soon start to discount policy rotation from the exclusive use of QE to stimulate animal spirits (which has failed) to a new policy mix of monetary-stability (central banks keep rates and rate volatility low and stable) and fiscal stimulus.
Tactically, we believe investors looking for exposure to this policy rotation theme should go long global industrials, semis, transportation, Japanese small-cap, TIPS and HY over IG. The duration of this trade will be dependent on the credibility of Japanese/European fiscal stimulus announcements.

This post was published at Zero Hedge on Jul 15, 2016.