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Bobby Coats
September 18, 2017
5 Min Read
Bobby Coats, left, University of Arkansas, and Nathan Childs, right, USDA economist, visit with David Jessup, president and CEO of DeWitt Bank and Trust in DeWitt, Ark., at the USA Rice Outlook Conference.
It has been a decade since we have witnessed synchronized global growth – not since 2007 – but a global expansion is underway courtesy of an orchestrated effort by governments and central banks around the world.
Through fiscal, monetary, trade and regulatory policy, governments and central banks are engaging in some heavy lifting to avoid a “MAJOR” U.S. and global economic downturn.
The current U.S. expansion is the third longest in history at 100 months. Given anticipated continued aggressive government intervention there is every indication that the current expansion will be extended one to four more years. We will discuss in more detail in a later articles.
What are the merits of intervening to extend the current economic expansion?
Actually there is not an option. To allow an economic downturn at this point would have a high probability of being economically destabilizing for most economies, as well as, equity and commodity markets and send the 10-year U.S. Treasuries to historic low yields.
The president and the Congress this past week signaled that a tax cut for corporations and individuals was on the horizon and implied stimulative activities were under discussion. This coupled with Irma being downgraded from a Category 4 to Category 2 hurricane as it plowed into Florida along with other factors opened the door to the very real possibility of an extended recovery with low and stable interest rates, U.S. and global equity prices having more strength than weakness, and accelerating and growing global demand for oil, base metals, and commodities in general for six months to two-plus years into the future.
Please visit the accompanying slide show to gain insight into the building global economic momentum taking place in many U.S. and global markets.
Now a word of caution the next six weeks have a tendency to be consolidation or corrective periods in many markets. In addition the seventh year of a decade from a historical perspective is a time of caution, which is why all should have highly professional market advisers.
What to expect from the markets this week, September 18, 2017
Market “Near Term” Snap Shot
Rice: Bullish bias remains
Cotton: Cautiously Bullish
Soybeans: Regaining bullish momentum, closing above $10.22 and holding implies a likely price bottom in place
Corn: Bearish with a bottoming process underway
Wheat: Holding current price levels implies a building bullish bias
10-year Treasury Yield: Sideways-Trading-Range on expectation of U.S. and gNotelobal fiscal simulative activities like corporate and individual tax relief
S. Dollar: Bearish – Possible corrective activity likely, the door is now open for a decline to 87 or lower
Oil $WTIC: • Consideration now needs to be given to a near term price floor being in place. The ongoing sideways choppy price action may be more bullish than bearish this week. The $45 to $50 trading range may give way to an upside potential of $55 or higher.
$CRB Commodity Index: Cautiously optimistic as this index builds a base to move higher
S&P 500: Primary trend remains up, but cautionary time period with momentum waning and consolidation needed
Global Equities Excluding U.S. and Canada: Primary trend remains up, but a cautionary time period with momentum ever so slowly declining
Feeder Cattle: Moving higher
In addition to the following “Expanded near Term Market Outlook Considerations for Week Beginning September 18, 2017”
Note: Download slide show for charts and expanded details by clicking download button below.
This Week’s Select Summary Considerations:
10-Year US Treasury Yield:
The 10-Year US Treasury Yield: Sideways-trading-range on expectation of U.S. and global fiscal simulative activities like corporate and individual tax relief
Bond yields need to hold at 1.95 or serious consideration must be given to ominous building economic problems
What could continue to move the yield lower? Demand, Economic Weakness, Event Risk Concerns, or Other Market Concerns/Factors could take the yield lower
S. Dollar Index:
Bearish – Possible corrective activity likely, the door is now open for a decline to 87 or lower
Given global macro considerations coupled with no significant global anomaly event moving forward this index may have some serious weakness
Unless Middle East, North Korean, European, Venezuelan or other anomaly events start to dominate market participant decisions, then we are still in search of a low for the dollar
CRB Index:
Cautiously optimistic as this index builds a base to move higher
Global government and Central Bank actual and anticipated intervention are giving every indication of bearing fruit
Bigger Picture: Though dangerously spastic, global macro and growth forces in general remain supportive of the commodity sector
$WTIC Light Crude Oil:
Consideration now needs to be given to a near term price floor being in place. The ongoing sideways choppy price action may be more bullish than bearish this week. The $45 to $50 trading range may give way to an upside potential of $55 or higher.
A complex, volatile and an uncertain market that deserves a great deal of respect in a world with building economic, social, political and homeland security uncertainties
North Korea, market structure, geopolitical considerations and building possibilities of a Venezuelan civil war are just some of the supportive factors
Soybeans:
Regaining bullish momentum, closing above $10.22 and holding implies a likely price bottom in place
Given improving complex global macro forces a retest of the $9.00 area or potentially lower into the $8.35 area is becoming increasingly less likely
Corn:
Assume bearish until price action becomes more supportive of a bullish case and give consideration to prices moving to their previous 2016 lows of $3.15 or below
Long Grain Rice:
Bullish bias remains, but keep peripheral vision on potential near term uncertain global economic crosscurrents related to currencies, bonds, equities and commodities as they go through a rebalancing process
Cotton:
The week of Sept. 11, 2017 was a sobering price action week, but bullish bias with a price consideration of 91-cents remains a consideration
Wheat:
Holding current price levels implies a building bullish bias
SPY SPDR S&P 500 ETF:
Primary trend remains up
A cautionary time period with momentum waning and consolidation needed
Allow price action to provide guidance
QQQ NASDAQ Power Shares:
Consolidation needed
Near term remain cautious of this index with momentum slowing
Allow price action to provide guidance
Primary trend remains up
EFA iShares ETF - Global Equities Excluding U.S. and Canada:
Primary trend remains up
A cautionary time period with momentum ever so slowly declining
Allow price action to provide guidance
EEM iShares ETF, Emerging Market Equities:
A cautionary time period
Allow price action to provide guidance
Bobby Coats is a professor in the Department of Agricultural Economics and Agribusiness, Division of Agriculture, University of Arkansas System. E-mail: [email protected].
DISCLAIMER-FOR-EDUCATIONAL-PURPOSES
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