LONDON (Reuters) - The U.S. election has sparked a "violent rotation" into assets like industrial commodities and inflation-linked securities on a wave of bets that a U.S. fiscal splurge will boost inflation, Bank of America Merrill Lynch said on Friday.
Donald Trump's election and his expected focus on tax cuts and higher infrastructure and defence spending is fuelling a switch out of "deflation winners" - assets that found favor during the era of near-zero interest rates and austerity, it said."The U.S. election has sparked a violent, tactical capitulation, out of deflation plays to inflation plays, out of ZIRP (zero interest rate policy) winners to fiscal winners," BAML strategists, led by Michael Hartnett, said in a note.Treasury Inflation Protected Securities (TIPS) which are indexed to inflation, have enjoyed their largest eight-week inflow on record, attracting over $5 billion, whilst commodities and equities also proved big gainers in the week to Wednesday.Although this rotation has been observable since early 2016, BAML said the U.S. election marked the moment the switch accelerated, with the bank's U.S. election flash fund managers survey showing that investors tentatively viewed the election as a "game-changer".Some 46 percent of respondents in the BAML poll thought Trump was most likely to pass a tax repatriation/infrastructure spending bill in the first 100 days.Commodities funds attracted $1.5 billon inflows in the week to Wednesday, the largest in 14 weeks, BAML said, with commodity prices jumping on the back of Trump's plans to fix U.S. roads, bridges, schools and hospitals.Copper