- 1997: Volume 6, No. 3 Outlook Optimistic for Equities, Commodities

The state of the current world economy should be described as growing, but at a controlled pace. The Central Banks have achieved enough control to make them think they can direct the world economy through coordination. While the Japanese and European economies are certainly the most suspect, growth in commodity demand continues at slightly better levels than last year! However, given the return to more even conditions in the stock market, commodities will see periodic liquidation moves sparked by the funds as was seen recently in cocoa and the metals.

Figure 1

We would consider recent developments a major pivot point for both Financial and Agricultural markets since both market segments saw significant bullish and bearish factors collide.

In the grain markets the proximity of large planted acres ran head long into rumors/reality of additional Chinese grain purchases while the financial markets discovered that the U.S. economy was not growing too fast at the same time that many traders realized that some minor rate hikes were not the end of the world.

Figure 2

Figure 3

In looking at implied gasoline consumption, copper consumption, platinum imports into Japan, grain buying patterns and the structure of interest rates, the only thing that can damage commodity prices in the months ahead is the threat of "excessive supply."

We are truly in a historical period in which most commodities are achieving prolific production and slow price gains! As for the U.S. stock market, we take recent actions very seriously as the fear of the Fed was basically the only stumbling block to a resumption of the bull market. Therefore, the pendulum for stocks is attempting a swing toward the bull camp again!

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