The trend for10-Year Treasury Yields should remain sideways with a downside bias, which is critically important for the U.S. economy and the collective global economies.
The 10-Year U.S. Treasury Yield or interest rate May 3, 2019 was 2.54 and given time has the potential to revisit the July 2016 low of 1.43. The November 2018 high was 3.24. Consider:
First, the global economic momentum going forward for multiple months will likely have a slight downside bias. Second, global economic stability will be maintained, even as global governmental actions address global economic challenges across the globe with a couple of examples being the European Union and Chinese uncertainties. Third, this will produce periods of strength and weakness in global economic activity, but lay a foundation for stronger domestic and global growth in 2020.
Reading the U.S. Federal Reserve tea leaves
U.S. Federal Reserve (Fed) under the leadership of Chairman Jerome H. Powell after the U.S. Federal Reserves’ latest Federal Open Market Committee (FOMC) meeting on April 30-May 1, 2019, emphasized they remain vigilant, patient, data dependent, and have a willingness to address any issues threatening domestic and global economic momentum.
The U.S. Fed sees the need to move from a monetary policy tightening focus through fed funds rate increases, unwinding their balance sheet, and other programs to a data dependent slowly evolving accommodative monetary policy position.
Also, the U.S. Fed has now signaled that in future months and years a proactive willingness, if required, to move to a highly unconventional accommodative set of increasingly aggressive monetary policy actions, so consider: A. Certainly lower interest rates will emerge and later maintenance of domestic and global economic momentum will likely require zero and even negative interest rates; B. A more robust debt monetizing program; C. Helicopter money or simply money printing and distributing the newly printed currency to the public with the objective of direct and immediate stimulus to the U.S. economy; and D. Other highly unconventional creative, stimulative and productivity focused ideas.
Each of these monetary policy actions could and will likely have to be implemented over time when deemed necessary and some of the Feds future actions will require Congress expanding their monetary authority to react and stabilize dangerous domestic and global economic undercurrents.
U.S. Dollar Index
The U.S. Dollar Index simply remains in a slowly rising, sideways to up trading pattern, which will likely be sustained for a period. See Charts A5 to A8. The dollar is currently at 97.26 on May 3, 2019. Consider the following about the U.S. dollar: First, a rising dollar will place a drag on U.S. domestic and global growth, given today’s global economic dynamics; Second, a neutral to lower dollar has been supportive of current U.S. economic activity and global economies in general; and Third, currency imbalances remain one of global leadership’s biggest challenges.
Market Dynamics and Outlook for the Week Beginning May 6, 2019
Soybeans: Near term soybeans prices remain sideways to down. The potential trading range remains $7.95 to $9.39 per bushel, May 3, 2019 close $8.42 per bushel. Charts B10 to B13.
Corn: Near term corn remains in a sideways trading range. The potential near term trading range is $3.44 to $3.78 per bushel and additional downside to $3.04 per bushel remains a consideration, May 3, 2019 close $3.71 per bushel, Charts B14 to B17.
Long Grain Rice: Near term rice remains in a sideways trading range with a downside bias. The primary trading range presently is July $10.13 to $10.87 per cwt. or $4.56 to $4.89 per bushel, May 3, 2019 July close $10.76 per cwt. or $4.84 per bushel, Domestic and global fundamentals certainly remain problematic for this market. Charts B18 to B20.
Cotton: Price momentum waning. My primary trading range is 70 cents to 79 cents per pound, May 3, 2019 close 76 cents per pound, Charts B21 to B24.
Wheat: Price weakness remains. Wheat is displaying a downside trading range of $4.08 to $4.65 per bushel with a May 3, 2019 close $4.38 per bushel. We will adjust our estimates as market dynamics unfold, Charts B25 to B28.
Global Equities: Approaching all-time highs and needing a corrective period, which a slowly rising dollar may accommodate. The global equity market performance as measured by the All Country World Index ETF-ACWI, a broad range of international developed equity and emerging market companies, Chart A19B, on May 3, 2019 had a value of $74.72 and is approaching its previous all-time high of $75.94 a liquidity driven accomplishment from its December low of $60.92.
Emerging Markets: Global emerging market performance near term will in part be a function of dollar strength and potential waning global economic momentum, so be vigilant of price action.The emerging Markets ETF-EEM, Chart A20, made a high in January 2018 of $50.98, a low in October 2018 of $37.02 and has presently regained upside to $44.22. The dollar’s near term slowly unfolding strength, China’s lagging contribution to global economic activity, coupled with European Union economic uncertainties are three key factors, which could limit near term potential upside to this ETF.
S&P 500: Remains at All-Time Highs. May 3, 2019 the S&P 500 is at 2946, up from the December 2018 low of 2347. The previous all-time high was in September 2018 at 2941. The S&P 500 could make new all-time highs from current levels, but if global economic momentum starts decelerating for a period, then the index likely starts the process of defining a trading range in coming months.
$CRB Index: Showing signs of weakness as momentum slowly declines in part due to global economic and geopolitical uncertainties, May 3, 2019 close 181.11, Range (171.85 to 190.65).With global deflationary forces, a key function of global debt, remaining problematic; with many of the world’s commodities surplus burdened; and with the ongoing global realignment of the world’s currency, bond, equity, and commodity markets there simply remain limitations to this index’s near-term upside, unless oil prices continue their upward march. Charts B1 to B5.
$WTIC Light Crude Oil: Light crude oil is losing upside price momentum, May 3, 2019 close $61.94 per barrel. Geopolitical dynamics coupled with supply uncertainties make this market challenging for analysts, so be respectful of price action, Charts B6 to B9.
No Crystal Ball
Since no one has a crystal ball or knows the future always consult an investment professional or professionals before making investment decisions. The world’s greatest speculators, investors and money managers are challenged by today’s global business environment.
Download Slide Show for charts and expanded details, Click Download Link