Despite the Treasury market’s strange reaction to the much better than expected US nonfarm payroll result for April, the overall outlook for the US and global economy was improved markedly by that data released last week.
Disappointing Trend and Sensitive Commodity Markets
Consumer spending in the US grew at a 0.3% rate in the first quarter, the smallest increase since the fourth quarter of 2009.
Global Recovery Fighting a Number of Headwinds
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.
US Economic Prospects Disappoint, International Economic Conditions Improve
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.
Overly-Negative View Toward the US Economy
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.
Plenty of Supportive Forces for the US Economy
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 Markets Undermined By False Hopes
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.
The Environment for Physical Commodities Could Be Negative in the Coming Weeks
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.
Possibility of Three Rate Hikes in 2017?
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.
Growing Recovery in the Global Economy
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.