'We have a historic level of excess liquidity and money supply growth': Strategist

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Excess liquidity and money supply growth are a more important focus for the markets than the elections, says one strategist.

“The extremes have been removed. In other words, the market basically gave an inappropriate run-up into Election Day on this idea of a massive stimulus package on a big blue wave,” Tony Dwyer, chief market strategist at Canaccord Genuity told Yahoo Finance Live.

He went on to say, “All you’ve done in the election is neutralize the tail risk, which leaves you with the most important thing, most powerful person, whether it was Alan Greenspan, Ben Bernanke, Janet Yellen, and now Jerome Powell, it’s the guys and gals making the money.”

“We have a historic level of excess liquidity and money supply growth,” said Dwyer.

He notes markets typically go down sustainably because it is either in a recession or fears one.

“What causes a recession is companies have a need for money with limited access to it. They lay people off and then the households fall short of money,” he explained.

Shrinking liquidity in early March was making the markets spiral as investors were unclear about what the Federal Reserve would do with a looming economic shutdown and rise in COVID-19 cases.

“Now we know. We have the greatest money supply growth in the country’s history. So I think that’s the focus, versus the election,” he said.

Federal Reserve Board Chairman Jerome Powell testifies during a Senate Banking Committee hearing, Thursday Sept. 24, 2020 on Capitol Hill in Washington about the CARES Act and the economic effects of the coronavirus pandemic. (Drew Angerer/Pool via AP)

Dwyer’s comments came ahead of the FOMC meeting today, at which Fed Chairman Jerome Powell is expected to speak afterwards. Powell has called for D.C. to provide more stimulus to help with the economic recovery amid the coronavirus pandemic.

Dwyer believes a stimulus will be passed, even with divided Congress and possible Biden administration. he’s elected president.

“Then you’ll have that access to fiscal stimulus. That’s on top of the money that’s already there,” he said.

Ines covers the U.S. stock market. Follow her on Twitter at @ines_ferre

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