Perspective: Morning Commentary for December 17

By: Arlan Suderman, Chief Commodities Economist

Fri, 17 Dec 2021, 14:25

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

December 17 – Rising inflation and Omicron worries continue to weigh on the tech sector, with stock futures under pressure this morning following a disappointing finish to Thursday’s trade. An increasing number of restrictions continue to be applied in the global community as Omicron rapidly spreads around the world – soon to become the predominant variant of Covid-19. The VIX is near 20 this morning, with the dollar near 96.1. Yields on 10-year Treasuries are trading near 1.40%. Crude oil prices are 1% lower, while the Ags were mixed overnight.

Inflation hit a record 4.9% last month in the European Union. Energy accounted for half the inflation seen in November. Core inflation that removes food and energy would have resulted in 2.6% year-on-year inflation. The European Central Bank has a mandate calling for 2% inflation - not above it or below it – but the ECB is still hanging onto the line that the U.S. Federal Reserve used for so long, stating that current inflation is transitory in nature. As such, it committed this week to maintaining a high level of stimulus, reducing one kind of stimulus while compensating by increasing another.

Delayed gratification was one of the greatest gifts my parents gave to me. It provided me the discipline to be patient and to do the work necessary to achieve the desired results. Yet, we live in an instant gratification culture today, especially here in the United States, but also in many other countries around the world. We don’t want to pay the price for the desired result. We want instant results that satisfy us without having to pay the price associated with it. This translates into both healthcare and economic policy. We desire a pill for whatever ails us so that we can live the way we want to live without experiencing any pain. We want an economic policy that keeps us comfortable and that gives us whatever we want without having to experience any times of sacrifice.

Japan conducted an economic experiment more than two decades ago based on this principle. It experimented with expansionary monetary policy that could help it avoid the pain of recession, ignoring some of the structural issues within its economy that needed to be addressed. Japan is still locked in that experiment today. Along came Ben Bernanke, who was appointed as Chair of the Federal Reserve. Bernanke was a student of the Great Depression that occurred in the 1930s, and he vowed to never allow a depression to occur on his watch. Then the financial collapse of late 2008 occurred. Bernanke sought an academic solution, focusing on Japan’s experiment with quantitative easing to inject money into the economy. He adopted the policy, and many other central banks followed. The pain was managed, and life went on.

Except, it didn’t fix the structural problems. It was like taking a pill that reduces pain we may be feeling in our body, but in the absence of the pain, we fail to fix the underlying problem. We came out of the recession, and the Fed attempted to normalize its balance sheet once again – remove the stimulus applied. There was a problem. The economy had become addicted to the stimulus. Along came the pandemic, and the Federal Reserve multiplied the expansionary policies by five-fold. M2 money supply rose by $6 trillion. The economy came roaring back, but the Fed continued the expansionary policy. It finally began to taper in November, but that’s still an expansionary policy – only at a slower pace. Trillions of dollars of stimulus remain in the economy, doing what it was put there to do – stimulating elevated levels of consumer demand. The consumer loves it, leading elected officials to support even more of it to keep voters happy.

But I was also taught that life doesn’t operate that way. There’s always a price to be paid for what is worthwhile. The price eventually needs to be paid. The longer you put it off – the greater the price to be paid. We’ve had very low interest rates now for more than a decade – frequently near zero. The economy has adjusted to this near-zero rate environment. Yet, continued high levels of stimulus result in increasingly higher levels of inflation. Paul Volker had to shock the economy back into normality with interest rates approaching 20% four decades ago. Today’s interest rates remain below zero when adjusted for inflation. Baby Boomers control 53% of our nation’s wealth. They reluctantly keep the bulk of that wealth in the higher risk stock market due to these negative real interest rates. They will likely look to transfer that wealth toward safer assets once rates rise above the rate of inflation. The possible implications for the markets are massive, which brings us back to this week’s monetary policy decision by the Federal Reserve.

The Fed finally seems to realize that it created a significant problem with its monetary stimulus, combined with fiscal stimulus, that will be very difficult to unravel. The stakes are high. Will it have the courage to allow the U.S. economy to face the pain of normalizing? Or will it revert to expansionary policy again as soon as that pain returns? The more it does so, the greater the longer-term pain will be for the U.S. and global economies, with implications for the markets. The Fed projects three rate hikes in 2022, with three more the following year. It hasn’t even started to discuss contracting the balance sheet or removing the stimulus in place yet. That would keep stimulus in place with negative real interest rates.

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Perspective: Morning Commentary for August 6

August 6 – This morning’s stronger-than-expected U.S. labor data offered markets some relief, reinforcing confidence in the economy while giving the Fed greater flexibility to raise rates should inflationary pressures reaccelerate in next week’s July data. Stock futures are pointing to a mixed open to start the day, with the tech-heavy Nasdaq showing the most weakness. The VIX has fallen notably from yesterday’s spike above 18.4 as it starts the day hovering just below the 16-mark. The dollar is quietly higher as it trades just above 99.8, holding in the tight range seen thus far this week as traders continue to digest data to shape expectations for the Fed’s next move, which we’ll dive into in more depth below. Long-term treasury yields have relaxed slightly from their recent spike, with 30-year yields starting the day trading just above 5.19%, while 10-year yields trade above 4.64%, and 2-year yields sit below 4.22%. Crude oil is modestly higher to start the session after sharp declines earlier in the week, with nearby WTI up 1.8% to trade at $76.40 and nearby Brent up 2.4% to trade at $81.40. Meanwhile, the ags are quietly mixed to start the day.

Mike CastleThu, 06 Aug 2026, 13:24

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Perspective: Morning Commentary for August 5

August 5 – U.S. equities markets are on fire this week, with both the Dow Jones and S&P 500 setting new all-time highs yesterday with futures indicating further gains again today; the marketplace remains optimistic over a deal with Iran despite no evidence of such as of yet. Crude oil is working on a lower high and low today but remains slightly on the high side on the session, while the dollar is retreating back towards Monday’s nearly two-month low. The ten-year note is steady-to-lower this morning (though solidly lower so far this month) at 4.605%, while the VIX index continues to rebound into mid-week at almost a 17-point reading this morning.

Matt ZellerWed, 05 Aug 2026, 12:39

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Perspective: Mid-Day Commentary for August 4

August 4 – The Dow Jones is absolutely piling on gains today, adding a similar number that led to yesterday’s record, with the benchmark index now nearing the 54k-point mark through mid-morning. The S&P also hit a new record, while the NASDAQ is exceeding both those gains on a percentage basis. The marketplace is optimistic on a U.S.-Iran trade deal, though the proposed resolution is still being “circulated between the parties”.

Mike CastleTue, 04 Aug 2026, 14:58

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