Greer: Fed’s Inflation Memo Sparked A New Leg of the Rally

Your Real Vision Daily Briefing for September 1, 2020

Ash Bennington hosts Tony Greer to discuss how the Fed’s “inflation running hot” memo has been translated by the markets.

  • The Fed’s “inflation running hot” memo has created a pivotal point in the market rally and the resulting asset price inflation is exactly what the Fed intended.
  • This new leg of the rally should last for the next few months; markets are responding to the Fed’s direction and there’s not much to stop it between now and the election.
  • There’s still room to run on commodities as every dollar that’s going to be invested in commodities and commodity stocks this year is not in the markets yet.

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August marked the fifth consecutive rally since the two down months of February and March, and the party continued today as the market is clearly getting Powell’s “inflation running hot” message, Tony Greer, editor of The Morning Navigator, told Real Vision during today’s Daily Briefing.

Greer said that the Fed’s memo is a pivotal time point in this rally and it seems to have ignited another leg. Asset holders are benefiting from asset price inflation—and that is exactly what the Fed intended, he said.

We’ve got a weak dollar, a steepening curve, a TIPS rally, and market-based inflation numbers ticking higher, all contributing to a commodities breakout, which Greer said is also the result of the Fed’s mechanism.

“When you keep passing the baton from one sector to the next, to the next, to the next, you get this kind of sustained price action and shock and awe we see on our screens,” he said.

Greer said he expects this rally to last for the next few months. “Markets are responding to the Fed’s direction and between now and the election, and I don’t see what stops it.”

Greer discussed this bullishness on commodities as a dollar play for starters, and added that the reason he’s so bullish commodities is that Powell announced the inflation targeting after commodities already staged an interesting bottom, a consolidation, and a breakout beyond their moving averages.

This tells him the market was telegraphing what was to come and now we have the opportunity to capitalize on the rest of the rally. He said there’s room to run on commodities; every dollar that’s going to be invested in commodities and commodity stocks this year is not in the markets yet.

For the rest of week, Greer is watching the Bloomberg Commodity Index to look for a follow-through in commodities and signals of headline inflation.

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