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A deepening liquidity trap would be bad news for equities

Writing in today’s Financial Times, Gavyn Davies argues that “nominal equity returns may be held back by low inflation but in real terms they should outperform government bonds, even if the liquidity trap deepens further”. We believe the logic behind this argument is fundamentally flawed. If the liquidity trap deepens further, equities are likely to do much worse than conventional bonds in real terms.

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