The Commodities Channel

Dissolving Musical Chairs

Over the completion of the current market cycle, we estimate that roughly half of U.S. equity market capitalization - $17 trillion in paper wealth - will simply vanish. Nobody will “get” that wealth. It will simply disappear, like a game of musical chairs where players think they've won by finding chairs as the music stops, and suddenly feel them dissolving as if they had never existed in the first place. Moreover, even if U.S. real and nominal economic growth were to fully recover to their long-term historical norms, it would take 12-16 years of 6% nominal growth, with zero price appreciation in the interim, to bring reliable valuation measures back to their own historical norms.

What Does the Health Care Decision Mean for Stocks?

There is plenty of “upside risk.” Earnings growth is improving, even in the environment of modest growth. The recent market strength could go on for years without any policy changes. If some of the Trump agenda (probably with Democratic support) becomes law, it could mean a spike in both economic growth and profits. We already see improved business and consumer confidence.

Bring On Brexit

The British government is set to invoke Article 50 of the Lisbon Treaty next week, formally signaling its intention to separate from the EU.

Strategist: Keep Calm, Tax Reform Is On Its Way

Regardless of its failure to be repealed, tax reform is on its way. Just today, Treasury Secretary Steven Mnuchin reassured Americans that we could still expect “comprehensive” tax reform by August. It’s also worth recalling that, even though he failed to reform health care during his eight years in office, President Bill Clinton still managed to tackle tax reform with the Omnibus Budget Reconciliation Act of 1993.

The "Real" Goods on the Februrary Durable Goods Data

Earlier today the Census Bureau posted the Advance Report on Durable Goods New Orders. This series dates from 1992 and is not adjusted for either population growth or inflation. Let's now review Durable Goods data with two adjustments. In the charts the gray line shows the goods orders divided by the Census Bureau's monthly population data, giving us durable goods orders per capita. The blue line goes a step further and adjusts for inflation based on the Producer Price Index for All Commodities, chained in today's dollar value.

The Threat and Risk of Rising Interest Rates: Separating Fact from Fiction

The threat of rising interest rates is all the rage in financial circles today. However, the seminal question is: How real is the threat, and how much impact will rising rates have on stock prices and investor performance?

ECRI Weekly Leading Index: WLI Down from Last Week

Today's release of the publicly available data from ECRI puts its Weekly Leading Index (WLI) at 144.6, down 0.8 from the previous week. Year-over-year the four-week moving average of the indicator is now at 10.96%, down from 11.76% the previous week. The WLI Growth indicator is now at 9.0, also down from the previous week.

Lithium Suppliers Can’t Keep Up with Skyrocketing Demand

Near the extinct volcano known as Monte Pissis, high in the Andes on the Chile-Argentina border, the air is thin and animal life scarce. It’s also a prime location for lithium, the silvery-white metal used in the production of lithium-ion batteries.

Fund Managers Become Bullish

A tailwind for the rally over the past year has been the bearish positioning of investors, with fund managers persistently shunning equities in exchange for holding cash. 

Treasury Snapshot: Yields Down Since Rate Hike

Let's take a closer look at recent activity in US Treasuries as the Fed's rate hike last week. The yield on the 10-year note ended the day at 2.40%, down 11 basis points from last week and the 30-year bond closed at 3.02%. The 2-10 yield spread is now at 1.13%.

Weekly Heating Oil Prices: Down Two Cents

We present our seasonal heating oil update which we will be following this closely throughout the season. The latest price of home heating oil nationwide is $2.60, down another two cents from last week and up 30 cents per gallon since the start of the season.

America’s New Emphasis on Fiscal Policy

For the third time in two years, the Federal Reserve lifted interest rates 0.25 percent last week following the previous week’s phenomenal jobs report. The move was seen as more dovish than many market analysts had anticipated. BCA Research went so far as to call it an “unhike,” citing a number of factors, including forecasts of only three rate hikes in 2017 instead of four.

Characteristics of Capital Preservation: A Look at the US Energy Sector

In a market experiencing the largest pullback since the election, investors are rightly looking for places to hide. At present, according to our work, the US energy sector is the only truly oversold sector.

S&P 500 Snapshot: Biggest Loss in Five Months

Today's S&P 500 opened at its daily high and proceeded to tumble throughout the day, ending the selloff with a 1.24% loss, its largest since October.

Bogged Down…

I know that I am not the only one feeling it. You can see the increasing risk in the markets and uglier action on the tape. Credit is seeing selling even as recession fears are distant. Bank stocks are rolling over even with the Fed raising interest rates.