LONDON (Reuters) – The threat of deflation in the euro zone could reverse a major investment trend of 2013, drawing funds out of stocks and into government bonds and cash. Europe is still some way from a negative inflation rate, let alone a Japanese-style deflationary spiral – the policymakers’ nightmare in which falling prices weaken demand, leading to wage cuts and even lower prices. But a warning light is already flashing, with euro zone inflation registering a shock drop last month that prompted an interest rate cut. This year’s “Great Rotation” flows away from bonds have propelled many stock markets to multi-year or record highs and fuelled a rally in property and other relatively high-yielding assets. But it’s a potential money loser in an environment of weak inflation or even outright price declines. With chronic price falls, investors become ultra-risk averse. “Deflation would follow from lower growth than we […]