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General Market Commentary
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General Precious Metals
Gerardo Del Real: The Table Is Set
by Gerardo Del Real
I hope everyone is having an excellent start to the new year.
2019 will be remembered as the year that set the table for a raging commodities bull market that will kick into high gear in 2020.
On the policy front, the Fed went from a stated goal of balance sheet tightening to a complete reversal and capitulation to Wall Street, which resulted in multiple rate cuts and a stance that leads me to believe that not only will we not see higher rates in 2020, but if the market has a fit, it could force yet another rate cut.
There are fundamental reasons to believe that if the Fed is catering to the stock market (and it is) and there is weakness in the broader economy (and there is) that we may see a cut in 2020.
The U.S. Leading Economic Index, for example, was up just 0.09% over the past year, which is the slowest growth since 2009.
Expect the kind of volatility in the major U.S. indices and the bond markets that, at the very least, makes the Fed consider an interest rate cut, though its preference would be to remain neutral in an election year.
Which brings me to the impeachment of President Trump in the House.
The short version is there’s not a chance that the Republican-controlled Senate follows suit as a vote to impeach there requires a 2/3 majority.
The markets know this and that is why there was a muted reaction to the news. Whatever your political beliefs, the event is a non-event for the markets.
A bigger deal economically is the signing of the phase one deal with China that is supposedly agreed to in principle and awaiting signature.
I’ll believe it when I see it but progress on the trade front is very positive for what many are calling the next big metals trade of 2020 — copper.
Goldman Sachs' Jeffrey Currie thinks copper is “set to inflect” in 2020 due to strong growth in China.
Morgan Stanley, Bank of America, and Citi also have positive expectations for copper and an improving global economy.