STOCK MARKET WATCH -- Wednesday, 29 October 2014

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3. Anyone Betting On Another 'Great Rotation' Is In For A Major Blow

http://www.businessinsider.com/r-the-equity-cult-alive-and-kicking-despite-deflation-threat-2014-10

LONDON (Reuters) - Anyone betting on another "Great Rotation" of investment flows out of bonds and into stocks is in for disappointment: it's not happening, and isn't going to.

In a world where deflation, never the most fertile ground for equities, is a bigger concern for policymakers than inflation, that seems a pretty safe call - but the surprise is that this time around both asset classes may be on to a winner.

Bonds tend to do better than stocks when inflation is weak because the value of the fixed income payments investors receive is protected. In periods of deflation the real rate of return is actually enhanced.

But many of the world's leading investment banks argue that the broader market backdrop - also characterized by low interest rates, low returns and high cash balances - leaves stocks just as well-positioned to benefit as bonds.



Read more: http://www.businessinsider.com/r-the-equity-cult-alive-and-kicking-despite-deflation-threat-2014-10#ixzz3HWqMqcpN