May 25, 2015
Building and launching our new website has given us an opportunity to take a fresh look at the markets in general and the variety of factors influencing recent investor activity. A confluence of events has served to alternately confuse and embolden market participants. The United States, Europe, Russia, Greece, and the Middle East have experienced major events that have shaped market direction, or lack thereof, for months.
A major drop in energy prices followed by a significant rally has supply and demand both in question. In addition, pending legislation, world-wide terrorist threats, and global weather events have increased the volatility in most markets. As each additional economic report from around the world is released markets react quickly to the actual or perceived information. Currently, as global economies attempt to gather themselves and begin sustained growth the majority of investors seem to be fixated on interest rates. It has been a forgone conclusion by many pundits the United States will be raising rates “soon”. Well, that term “soon” has been bandied about for over a year and the Fed has not moved yet. The concern for the U.S. Fed as well as many central banks is the sustainability of growth.
Over the last few years the unemployment number was the central focus. Conventional thinking, at least in the U.S. has been that the normalization of interest rates should be tied to improved employment numbers. The thinking being if more people are working then the economy must be improving. If the economy is improving businesses will need more and more workers to meet improved demand. Competition for workers would mean improved wages. Improved wages allows for more consumer spending. Increased demand reflected in consumer spending theoretically leads to higher prices as more individuals scramble for a limited amount of goods and services. Until businesses provide the additional inventory there is a need to ration existing inventory through rising prices. Theoretically again, as prices the measures of inflation should be reflected in the government measurements. It has been often stated by the Fed that their “goal” for the economy is reduced unemployment below a certain number (it keeps changing) along with an inflation reading of two percent or greater. At that time, it is believed, rates could be raised without thwarting the growth of the economy.
Currently there seems to be confusion as some economic reports show an improvement but the economic growth is extremely slow, not widely reflected at all levels, and inflation numbers are still low. Additionally, the melding of economies globally has created a need for an increased level of sophistication on the parts of all central banks to help maintain economic growth and balance. Increase concern about the European Union and their individual members has also increased the scrutiny of all central bank actions. Quantitative easing was curtailed in the U.S. at the same time European banks and others globally were increasing their QE. So, there are numerous factors to consider when investing in any markets, domestically or globally.
We are Dallas Commodity believe that current political and macroeconomic conditions are at a historically significant point in time. Where will interest rates go? Will global stock markets continue to flourish even if interest rates begin to normalize? Has there been significant economic growth to encourage additional capital expenditures? What natural events will impact the commodity space? As the threat of terrorism spreads around the world what impact will that have on communities and their government?
These and many other questions are what shape markets and market direction. We believe over the next few years that tremendous movement will occur in multiple market sectors. What direction —- no one can be certain. However, we encourage you to maintain a highly diversified portfolio with exposure to areas such as stocks, bonds, real estate and commodity futures. Because of the non-correlated nature of alternative investments participation in a variety of market sectors can prepare you for any eventuality.
We are excited about our new website and the opportunities ahead. Thank you for taking the time to explore what our new website has to offer. Visitors will find a multitude of tools to increase your learning and understanding of our markets. Clients will enjoy all the additional research and market information available along with the new highly-secured Client Portal giving real-time access to your account.
Whether you are interested in hedging, speculating, or exploring a well-managed futures account our experienced team at Dallas Commodity can help you diversify your investment portfolio. Allow us to help you explore what a truly diversified investment approach can accomplish.
All the best,
Mitch LaRocca, Jr.
This material has been prepared by a sales or trading employee or agent of Dallas Commodity Company and is, or is in the nature of, a solicitation. This material is not a research report prepared by Dallas Commodity Company's Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.
The risk of loss in trading commodity futures contracts can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. You may sustain a total loss of the initial margin funds and any additional funds that you deposit with your broker to establish or maintain a position in the commodity futures market.