You are here

A Money Shift Into Commodities Ahead?

Bull markets die on euphoria.

The stock market has been in a nine-year uptrend, with stock prices accelerating in 2017 on anticipation of a friendlier business environment.

If the old “buy the rumor, sell the fact” saying has any validity, the stock market may be the perfect example. As stock prices continue to move higher and investors see gains, confidence and a bullish attitude grow. One look at this year’s gains in the stock market suggests unbridled enthusiasm. At some point, a top will be in.

An upward acceleration could be great for returns one day, and spell a top and a recipe for disappointment or a disaster, should stock prices plunge. Stock buyers beware.
 
On the flip side, commodities have been trending in a sideways market for a couple years, and have lost significant value since peaking in 2012. Ample supplies of many commodities, both domestic and worldwide, suggest there’s no urgency for investors to shift dollars into commodity ownership – at least not now. That could change.
 
One scenario that could develop is that money moves from the stock market into commodities in the next year. Four years of low prices has spurred significant demand, which continues to grow. The old saying is “low prices cure low prices.” Demand may be viewed as a ship which, once sailing, does not turn around unless prices increase.

What can drive prices higher? It will take a shortfall of supply, increased demand, or both. Many commodities, such as corn, are priced at or below the cost of production. End users are able to buy at bargain prices. Should the stock market peak and investors seek new investments, commodity markets are poised to be the recipient.
 
While it may not be fashionable for money managers to buy oversupplied commodities now, growing demand has set the stage for higher commodity prices. Markets move on perception, momentum, and attitude. As these variables change and align in the commodity markets, money will seek opportunity. Wishful thinking? Maybe, yet history would suggest otherwise. Prepare yourself for any scenarios.
 
If you have questions or comments contact Top Farmer at 1-800-TOPFARM, ext. 129.
 
Futures trading is not for everyone. The risk of loss in trading is substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Past performance is not necessarily indicative of future results.

-----------------
Carol Tillmann
Front Desk Administrative Assistant | Stewart-Peterson
Office: 800.334.9779 | Fax: 262.334.6225
ctillmann@stewart-peterson.com
www.stewart-peterson.com
 
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Hypothetical performance results have many inherent limitations. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Reproduction of this information without prior written permission is prohibited. This material has been prepared by a sales or trading employee or agent of Stewart-Peterson and is, or is in the nature of, a solicitation. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Stewart-Peterson. Stewart-Peterson refers to Stewart-Peterson Group Inc. and Stewart-Peterson Inc. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with both companies. Accordingly this email is sent on behalf of the company or companies providing the services discussed in the email.

Read more about

Talk in Marketing

Most Recent Poll

Will you plant more corn or soybeans next year?