INFLATION TRADE: GOLD AT 3,500 AND THE NASDAQ AT 4,000. WHY NOT?
Days like today should serve as encouragement to anyone with bullish aspirations that go beyond next week. Days like today tell us that the inflation trade is alive and well. Commodity prices and equity prices are bosom buddies. And as long as this remains a recurring theme in the marketplace, the bulls will continue to win. There will be short term setbacks. Some intermediate term setbacks will come along. Over the long-term, however, inflation will win. It will come in the form of higher asset prices, equities included.
The leaders of the inflation trade are major commodity issues. Gold and oil being the king and queen. The modern day gold bull has become a leading indicator of the inflation trade. It tells us that the inflationary forces that have successfully resurrected the world economy will continue exerting their force over everything from equity issues to the price of corn, coffee and oats.
There isn't an investor out there who would have predicted $1500 gold prices paired with the Nasdaq being at 10 year highs. This is just one example of the recent change in market dynamics and correlations. This change has created a series of new correlations that will continue to challenge everything traders have come to believe about what commodity inflation means for the equity market.
$300 crude oil and Dow 21,000. You bet. Gold at 3,500 and the Nasdaq at 4,000. Why not? Everything that you think is "normal" will be turned on its head in the coming years. It will be all be part of the inflation trade. And it will be a chance to profit if you maintain an open mind.
