Since 1979 the Federal Reserve has raised rates at times to stop inflation. Yesterday, though, it did something new. Jerome Powell predicted that inflation is going to go to 2.4% on CPI in 2021 and that he is not going to do anything to stop it, because he claims that it will go back down below 2% next year. I don’t know if we can believe that or should as he presented zero evidence to back up that prediction.
What matters is that the markets are hearing him say that he is going to let bond yields stay below the rate of inflation for a period of time (he says unspecified) if inflation picks up. As a result gold and silver rallied yesterday. It’s probably the most dovish statement I have ever heard from a Federal Reserve Chairman. It renders bonds useless as an investment and drove some people into gold and silver. I think this new rally in the metals is only starting, but the overall stance is going to conducive for global economic growth. Powell and his Federal Reserve friends upgraded their prediction for 2021 GDP growth from 4.5% to 6.%. In the press conference Wednesday he used the word “take off” multiple times to describe the economy and CNBC reporters went wild in excitement. In fact a headline on CNBC’s website read “Fed Chair Powell is a ‘maestro,’ calming markets when there could have been chaos.” Headline phrases like that start to venture away from straight news to propaganda. It’s fun to see stocks go up, but the worship of Fed officials caused many TV talking heads to be unable to warn of what was happening in the summer of 2008.
Nevertheless, here are three stocks I own that I think are ready to go. First, the obvious is a mining stock. Check out the chart for PAAS.
Secondly, check out shipping stock EURN, which has not broken out yet.
And another shipping stock, which I don’t think I’ve mentioned yet that I also own is NAT.
I did a live trading session at 3:00 PM EST yesterday as Jerome Powell was halfway through his press conference.
We certainly are entering interesting times. For more on my trading methods grab my book Strategic Stock Trading.
If you have any thoughts you’d like to share or questions just scroll on down to the comments section at the bottom of this post.