We hope that the Fed isn’t wrong about the recovery continuing, and we hope that the weak US data is a temporary trend and that the US economy is merely taking a pause.
The US data has been patently discouraging; the Trump administration continues to squander political capital; and the prospect for pro-growth policy initiatives continue to be pushed further and further into the future.
All things considered, it is clear that the global economic track has softened and has become a disappointment after the optimism that followed the US election.
The steep drop in many commodity market sectors could be nearing an end as a little less volatility in financial markets, a more positive tilt to the Chinese and Indian economies and less safe-haven investing could leave the US economy in good shape going forward.
The spec and fund net long of 20 nonfinancial commodities has come down significantly in March (down roughly 650,000 contracts), but it remains at lofty levels.
While the inevitable happened in the March FOMC meeting, the reaction in the dollar was very surprising and was modestly supportive to a number of commodities.
It would appear that the markets are locked and loaded for a March 15th rate hike, with some players suggesting an increase in probability that there will be three hikes this year.
The most important developments this past week were a market-perceived delay in the timing of the next US rate hike, another failed rally in the dollar, and upside breakouts in gold and silver off the latest wave of US/Chinese trade war fears.
The most important developments of last week were 1) indications that world oil producers were poised to extend production cuts (or even expand them if it becomes necessary to reduce global oil stocks to five year average levels) and 2) percolating fears of bird flu in Asia.
Just when it appeared that the reflation play was being reversed, the new US Administration managed to return its focus to pro-growth policy initiatives.