In this episode of Opto Sessions, TG Macro founder Tony Greer explains that the markets are currently in the process of reorganising themselves — moving away from tech in order to focus on the issues of the day such as the shift to electric and supply chain bottlenecks. As a result, he thinks investors’ portfolios could start to look very different.
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The US economy is on the cusp of a grand reorganisation — one that will impact the markets in profound ways, sending some stocks soaring and others stumbling.
That’s according to Tony Greer, the founder of research firm TG Macro, anyway. As he sees it, while the economy of the past 15 years or so has been driven by the dominance of tech firms like Facebook (Meta Platforms) [FB], Apple [AAPL], Amazon [AMZN] and Google [GOOGL], the US economy is now pivoting away from technology stocks and towards natural resources.
“The Biden administration’s big play is to transfer the country away from fossil fuels and towards electric-powered vehicles,” he says. “For that, we need a massive battery-powered infrastructure. It’s going to require a lot of metal and rare earth metals.”
These are commodities of which there are abundant supplies — but not enough infrastructure in place to get them out of the ground. As a result, Greer says, prices are going to “historic highs”.
“I walked face first into the Nasdaq bubble, and I got to learn one of the ultimate lessons of my life.” - Tony Greer
So, what does this mean for traders? Greer’s prediction is that investors, seeing their tech stocks slump, will start to turn to stocks that are likely to benefit from these skyrocketing commodities, and that will play a pivotal role in easing supply chains. “Portfolios are going to start valuing energy stocks, commodity stocks, agricultural producers and things like that,” he says. “The FAANG stocks have seen their finest moments, and will now see a rotation out of them.”
The markets support Greer’s theory, he says. While the tech-heavy Nasdaq is down 22.2% year-to-date as of 7 June, the Bloomberg Commodity Index is up 38.4% over the same period.
Greer’s confidence in commodities is perhaps no surprise. A good chunk of his career has been spent getting to grips with these assets — between 1994 and 2000, Greer worked for J Aron, the commodities trading arm at Goldman Sachs. There, he tracked the market for gold and precious metals, and he looked after the bank’s commodities index, a basket of 22 weighted commodities.
“That experience gave me the foundation of the tools and network that I use today to follow what’s going on in this market and track it carefully,” he explains. He has also previously had a negative run-in with a tech market bubble: in the early 2000s, Greer was bullish on tech, believing that “my participation and the money I made was because of brains, not because of a bull market,” he says. “I walked face first into the Nasdaq bubble, and I got to learn one of the ultimate lessons of my life.”
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