CNBC reports that according to Barclays, with Covid-19 cases on the rise and a range of macroeconomic shifts occurring, the global market narrative has moved from “goldilocks to growth scare”.

The British lender suggested hedging remains warranted for investors given the swirling crowd of downside risks, but argued that the recent sharp reversal of the reflation trade was “overdone.”

“The combination of data no longer delivering positive surprises, burgeoning evidence that supply and labour shortages could mean stickier inflation, China’s increasingly determined crackdown on various industries, and increasing risk from the COVID delta variant have coincided with enough force to give markets a growth scare,” said Emmanuel Cau, head of European equity strategy at Barclays.

Cau highlighted that the prospect of lower growth and higher inflation is driving large and somewhat erratic moves in asset prices, with the recent dramatic fall in yields being the most obvious indicator.

“Equities so far have held up relatively well, but this belies large risk off rotation underneath the surface, which has largely washed out the positive returns from reflation trades,” he said.

What’s more, poor summer liquidity and mixed messages from central banks is adding to market confusion and likely exacerbating the sharp moves, Cau added.