In retrospect, the recent sharp declines in equity prices and significant pressure on industrial commodities were justified by disappointing US scheduled data and the Fed’s move to notch interest rates upward.
USDA
US Economic Data Continue to Soften
The good news is that a series of potentially serious geopolitical issues were traversed recently without sustained damage to the global economy or investor sentiment.
World Economy Remains Upbeat
By many measures the world economy continues to recover. The pace is apparently disappointing to commodities but not to equity markets.
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.
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.
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.
Plenty of Positives for Physical Commodities
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.
Surprising Global Economic Outlook Improvement
The outlook for China seems to have improved enough for them to raise short-term interest rates. In the wake of this general progression, growth-sensitive industrial commodities like crude oil and copper have already benefited.