Perspective: Mid-Day Commentary for October 31

By: Arlan Suderman, Chief Commodities Economist

Fri, 31 Oct 2025, 15:39

Today's Perspective Video: We Have a Deal with China!

October 31 - Stocks opened higher this morning on Wall Street after both Apple and Amazon provided positive outlooks in their earnings reports. That provided support for stocks this morning, although the major indices remained just below this week's record highs as we close out the month. The VIX firmed a bit to trade near 17 going into the weekend, while the dollar index trades near 99.8. Yields on 10-year Treasuries are trading near 4.10%, while yields on 2-year Treasuries are trading near 3.60%. Crude oil prices are modestly higher as they consolidate above $60 per barrel, while the grain and oilseed markets were mixed to weaker. Corn and soybean prices pulled back following this week's gains while waiting for fresh fodder to justify any additional strength above this week's highs, while wheat prices struggle to justify this week's short-covering gains in the absence of any mention in the China trade talk. We continue to hear reports of late-season freeze damage in Argentina's wheat crop, but thus far the market lacks a reason to take out this week's highs amid our large supplies here in the States and relatively low prices in the Black Sea.

Our StoneX Commodity Index tracks the value of a basket of 27 commodities covering each of the different sectors including the grain and oilseeds, livestock, the softs, energy, precious metals and industrial metals. That basket of commodities increased in value by 11.5% year-on-year, largely led by 48.2% gains in precious metals as both gold and silver posted new record highs recently, along with 14.9% gains in livestock due to record high beef prices. This basket of 27 commodities has a 10-year correlation with the five-year breakeven inflation rate - what the market expects inflation to be over the coming five years - of 0.86. A correlation of 0.70 or greater is considered statistically significant. The basket's correlation with the consumer price index (CPI) over that 10-year period is 0.74 and weakening over the past couple of years as precious metals and livestock values reflect more inflation than what the overall CPI does. However, the below graphic shows the correlation between the grain and oilseed subsector and the CPI to be a much stronger 0.88 over the past 10 years, while this subsector's 10-year correlation with the five-year breakeven inflation rate is still a solid 0.81.

Livestock prices posted record high levels due to supply and demand factors unique to that sector. An extended period of drought years in the western half of the United States resulted in cow herd liquidation dropping U.S. beef inventories to their lowest level in nearly 75 years. Prices for precious metals surged in part due to central bank gold buying, etc., but much of the sector's strength also came as investors ownership due to elevated levels of uncertainty in the economy. The rest of the commodity sectors better represent what's going on in the economy relative to inflation expectations. The next best correlation to inflation can be found in the energy sector, which has a 0.85 10-year correlation with the CPI, and a 0.86 10-year correlation with the five-year breakeven inflation rate. The energy and the grain and oilseed sectors are therefore two sectors to watch regarding both inflation expectations, and regarding inflation reality. The funds like to own both of these sectors when they see inflation coming. Consumer surveys indicate that they expect inflation approaching 5% down the road, but the market suggests that it sees more moderate inflation in our future. Yet those inflation expectations could spike if we see uncertainty removed from the economy at some point over the coming year, with record high M2 money supply ready to juice the economy.

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