First, let’s look at the Equity Markets, it’s been too easy for far too long. We are now in the midst of the longest bull market run in history, not that time alone should be a reason for the bull market to end. We have not even seen a meaningful correction to test whether the market is truly strong. Most of the rally has been based on easy monetary policies. Historically low interest rates have made the equity markets the only game in town, there’s been no other way to get a return on investment in the markets. Equity traders don’t feel a “need” to hedge with futures anymore because the market keeps making new all-time highs. Things are now changing, and the equity markets are coming under pressure by rising interest rates, treasury yields are at ten-year highs. Equities are no longer the only game in town, it’s time to start using futures to hedge portfolios.
Suddenly, we have an economy that is really heating up; Consumer confidence, manufacturing confidence and GDP now above 4.0% are good indicators of a very strong economy. Commodities are a great way to hedge inflation because they are undervalued. Grain markets have been beat up by the trade war with China. Gold, silver and platinum are good long-term buys at these current prices. Coffee, cocoa and sugar are all at attractive levels too.
I think that it’s time to start looking for under-valued commodities.