It’s a Busy Week for Central Bankers

TL;DR

Tony Greer discusses the upcoming FOMC meeting, the potential hike in interest rates, and the state of the oil market. He suggests that the market may be set up for an upside move in the S&P 500 and shares his insights on the correlation between the dollar index and gold.

Transcript

will the fed hike 75 basis points or a hundred basis points that's the question everybody is asking right now welcome to the real vision briefing it's tuesday september 20 2022 i'm ash bennington joined today by tony greer founder of tg macro how you doing ash oh doing great man it's great to be back here with you sure is it sure is good to see you... Read More

Key Insights

• 🙃 The FOMC meeting may result in a dovish policy, leading to an upside move in the S&P 500 as portfolio managers have already sold off in anticipation of a rate hike.
• 😮 The use of the SPR by the administration is seen as a tool to manage optics around rising gasoline prices, but once sales slow down or stop, oil prices are expected to rise.
• 🏅 The negative correlation between the dollar index and gold indicates that gold prices may continue to face pressure as the dollar strengthens.

Questions & Answers

Q: What is Tony Greer's take on the potential upside move in the S&P 500?

Greer suggests that sentiment, low AI bull index, and the break of the S&P wedge indicate a setup for an upside move in the S&P 500. He believes that the selling pressure due to expectations of a 100 basis points rate hike may have already been done.

Q: How does Greer interpret the relationship between the dollar index and gold?

Greer states that there is a negative correlation between the dollar index and gold. As the dollar index rises, gold prices tend to decline. He mentions that gold hasn't found a bid since the dollar index started increasing, indicating that gold prices may continue to face pressure until the dollar stops rising.

Q: What are Greer's thoughts on the strategic petroleum reserve (SPR)?

Greer believes that the administration is using the SPR to manage the optics of rising gasoline prices. He predicts that once the sales of SPR oil slow down or stop, the price of oil will increase significantly, as there is little selling pressure outside of the SPR.

Q: How does Greer view rising mortgage rates and their impact on the housing market?

Greer notes that rising mortgage rates are negatively affecting the housing market. Despite better-than-expected housing data, home builders are not seeing an improvement in their stocks due to concerns about increasing 10-year yields, which may further dampen demand for mortgages.

Summary & Key Takeaways

• Greer believes that the FOMC meeting may result in a dovish policy stance, contrary to expectations of a 100 basis points rate hike. He suggests that portfolio managers have already sold off in anticipation of a rate hike and this could lead to an upside move in the S&P 500.

• He discusses the state of the oil market, highlighting the use of the Strategic Petroleum Reserve (SPR) as a tool to manage optics rather than address supply shortages. He predicts that once the SPR sales slow down or stop, oil prices will rise.

• Greer also mentions the better-than-expected housing data but notes that home builders are not reacting positively. He attributes this to the increase in 10-year yields, which are causing concerns in the industry.