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Equity markets turning bullish, grain markets basing

Bobby Coats and Bert Greenwalt attend Ag council of Arkansas meeting
Bobby Coats and Bert Greenwalt, agricultural economists with the University of Arkansas and Arkansas State University, catch up at the Agricultural Council of Arkansas annual meeting in Little Rock.
French elections continue to dominate economic considerations for EU, financial and commodity markets.

French presidential candidate, Marine Le Pen, president of the French National Front political party, did not receive the most votes in France’s Presidential Election, but she received the second most votes.

The point is no one doubts she led the French Revolt against the “Old Guard French Political Elite Republican and Socialist Parties whose candidates came in third and fifth.”

In a field of 11-presidential candidates, the top five candidates were Emmanuel Macron (On the Move!) receiving 23.9 percent of the votes; Marine Le Pen (National Front) receiving 21.4 percent of the votes; Francois Fillon (The Republicans) 19.9 percent; Jean-Luc Melenchon (France Unbowed)19.6 percent; and Benoit Hamon (Socialist Party) received 6.4 percent of the votes.

Macron and Le Pen will be in a French presidential run-off election on May 7, 2017.        

Le Pen, the National Front candidate is more of a capitalist, who believes in French nationalism and sees the European Union as more of a liability than an asset to France’s future.

Macron is a different version of the establishment, very pro-European Union and Euro and with a centrists’ view being conservative on some issues and liberal on other issues.  

Seems at least in this election political elite and market participants expectations panned out. They did not expect Le Pen to receive a first place vote, but they did expect her to be in the runoff.

Given that Le Pen came in second in a field of 11-candidates the initial market response is one of total relief. Why?

A stronger showing by Le Pen would have suggested an increasing probability of her winning the May 7th runoff election, which would have suggested the strong likelihood of France following the United Kingdom and leaving the European Union. A French exit of the European Union would suggest the European Union as it currently exists would not be sustainable. Obviously once the market recognizes the European Union is no longer sustainable then the dollar continues to strengthen against the Euro, likely limiting U.S. exports in the global marketplace.

Can Le Pen defeat Macron on May 7th?

Over the next two weeks the answer to that question will receive a great deal of attention. It appears that most if not all French political parties will come out in support of Macron and against Le Pen, so the question becomes how will French citizens vote? France is so heavy “socialist” that a Le Pen win appears unlikely, given her inability to attract more votes in the first round of voting April 23rd.

Now we wait for the May 7, 2017 French Presidential Election runoff.

What to expect from the markets this week?

Market “Near Term” Snap Shot (To see the charts accompanying this analysis, click on

  • S. Bonds: Slightly Bearish – Rising Yield
  • Domestic Equities: Mostly Turning Near Term Bullish
  • Global Equities: Some Consolidating Gains, While Others Turning Near Term Bullish
  • S. Dollar: Sideways - More Weakness Than Strength
  • Commodity Index: Searching for a Bottom, Caution Advised
  • Oil: Dangerously Weak
  • Soybeans, Corn and Wheat: Basing Continues - Bullish Bias
  • Rice: Neutral
  • Cotton: 84-cent Price Objective Remains


A May 7, 2017 vote for Macron is a vote for the European Union, the Euro, advanced socialism and financial repression and an accelerated move toward debt paralysis.

A May 7, 2017 vote for Le Pen is a vote for nationalism, likely exit from the European Union and Euro, closer U.S. and United Kingdom ties, a greater global leadership role, etc. What is the downside of a Le Pen win? Unwind of heavy socialism would come with major social withdrawal consequences with the only consolation being it is better to start sobering up now because in-the-not-to-distant future socialism dies with some level of debt default.

Near Term Market Summary Considerations Week Beginning April 24, 2017

Link to slide show:


  • 10-Year US Treasury Yield:
    • We enter the week slightly bearish with a potentially higher yield
    • A weaker than expected showing by French Presidential candidate Marine Le Pen in the first voting round April 24, 2017 would likely take yields higher
  • US Dollar Index:
    • Sideways to Down – Given the French elections on Sunday April 23, 2017, the dollar is likely to be “SPASTIC THIS WEEK” within a range
    • If Le Pen wins the French Presidential Elections on May 7, 2017 then the dollar will likely have a bullish bias
  • CRB Index:
    • With oil price correcting and Geopolitical uncertainties consolidating for lack of a better descriptive phrase the CRB certainly appears to be about to break support and find a deeper bottom
    • Between Fed off-again and on-again accommodation and building uncertainties surrounding fiscal, trade and regulatory policy simulative activities, this key economic indicator has struggled
  • $WTIC Light Crude Oil:
    • Fundamentals are finally weighing heavy on oil prices with a possible downside of 41, maybe lower
    • That said, remain focused on the bigger “Geopolitical Picture and Building Military Friction”
    • Sustained oil prices below $50 presents interesting macro challenges and implies greater global stability than actually exists
  • Soybeans:
    • Global events appear to be near term supportive of the rice and grain complex
    • Price floor likely in place, basing process underway
    • Fiscal and Monetary Uncertainties in-part imply possible corrective price action underway before prices head lower
    • Simply stated watch the price action to define soybean price dynamics
  • Corn:
    • The week of April 24, 2017 was a little disconcerting
    • Basing period underway with upward price momentum being regained
  • Long Grain Rice:
    • Price firmness on the back of the March 31, 2017 USDA Prospective Planting Report emerged, now some concern related to expanding rice acres beyond March 31st planting expectations could put downside pressure on prices
    • Given rice fundamentals, price will likely move in sympathy with grain prices and global economic momentum and/or agronomic outlook
  • Cotton:
    • Geopolitical uncertainties remain high, so caution is advised
    • That said, complex price action underway with a bullish price objective into the 84-cent area still remains in play
  • Wheat:
    • Caution is advised for all markets due to geopolitical risk uncertainty
    • Bullish price potential to $4.71 remains a possibility
  • SPY SPDR S&P 500 ETF:
    • Consolidating gains
    • Likely turns bullish for a short period
    • Trend remains up
  • QQQ NASDAQ Power Shares:
    • Consolidating gains
    • Likely turns bullish for a short period
    • Trend remains up
  • EFA iShares ETF - Global Equities Excluding U.S. and Canada:
    • Global events need to be digested
    • Entering a cautionary period
    • Consolidating gains likely
    • Trend remains up
  • EEM iShares ETF, Emerging Market Equities:
    • Global events need to be digested
    • Entering a cautionary period
    • Consolidating gains likely
    • Trend remains up
  1. Bobby Coats is a professor in the Department of Agricultural Economics and Agribusiness, Division of Agriculture, University of Arkansas System. E-mail: [email protected]


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