Growth stabilizing vs growth slowing is the question we’re trying to answer at the moment. The inflation component of the cycle is likely to reaccelerate (this is all but a forgone conclusion already) – which is why we’re bullish commodities in Q4. Q4 2019 comps vs Q4 2018 – and we all know the deflationary vortex that hit the market last year. Remember we’re concerned about whether growth and inflation are getting better y/y vs getting worse and NOT whether they’re just beating headline expectations. Moving on….
USD – is this it? Maybe, maybe not, but the Fed is once again expanding its balance sheet (expected to surpass $4T in the near-term via T Bill purchases) – and “Peak Dollar” certainly plays into our “Bullish Commodities/Inflation” theme in Q4 ’19.
Oil – Bounce. Massive inventory build yesterday of 9.2M bbls and we still traded higher through yesterday and into this morning. Bulls are not out of the woods just yet….but the supply/demand picture (believe it or not) is beginning to look more favorable for higher prices into year end. Consumption is likely to rise in early 2020 by 1.1 million bpd, up from 800K bpd this year. Loose monetary policy and weaker USD should also help give Oil prices a lift.
Gold- in a very tenuous position right here. Bulls have to be disappointed with the recent slide in the USD and next to no response from Gold prices. The USD is immediate-term oversold, we’d expect a bounce from present levels which could pressure Gold again. We’ll come back to this again, but only from the low end of our range.
Have a great Weekend!
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