The speed with which markets fell was unusual, and the speed with which they are rebounding is unusual, but they are fairly normal in relation to each other, Roger Hirst said during today’s Real Vision Daily Briefing. 

Despite how unprecedented the situation is, Hirst said the market is following technical retracement levels, which shows that there’s still some degree to cyclicality to this financial crisis. He said we are still in a rebounding phase and it could grind on for a lot longer, but that his base case is for the market to roll over. 

If we break higher, it won’t be about valuation or profits; it will be entirely about the mechanism of monetary and fiscal coming through and working its way into financial assets with almost no reflection on the real economy, he said.

Hirst also talked about inflationary and deflationary dynamics as they relate to disruptions in supply chains, as is starting to happen with meat production in the US. He described scenarios where input prices become deflationary when there’s a break in the supply chain that moves goods to the market, as well as cases where supply chain bottlenecks coupled with surging demand have an inflationary impact.

“There are all different types of inflation and we don’t yet know which way this is going,” he said. “There’s no clear answer yet – the real inflation story is way down the road.”

To wrap up the conversation, Hirst offered investors a sensible way to play the current market, and that is to go into EM FX. He said that with relatively low volatility, it is a remarkably good value.

“Countries that can’t print their way out of this are the way to play this,” he said. “It won’t be as sexy – you’re not going to get 10-20% moves, but if you want a much more stable way to play the true macro story, you go to the FX markets. Because volatility is lower, if you’re wrong, you will live to fight another day.”