Perspective: Morning Commentary for October 26

By: Arlan Suderman, Chief Commodities Economist

Tue, 26 Oct 2021, 13:26

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

October 26 – Stocks are poised to build on Monday’s record run, although continuing the run may hinge on today’s big tech earnings reports. The VIX is trading either side of 15 this morning, reflecting the growing complacency on Wall Street ahead of next week’s Fed policy meeting. The dollar index is trading near 93.8, while yields on 10-year Treasuries are trading near 1.63%. Crude oil prices are modestly higher today, although still below yesterday’s fresh seven-year highs above $85 per barrel. The Ags are mostly lower in a pull back this morning.

The Federal Reserve is expected to outline its plan to taper its easy-money policy next week. Ironically, the Fed stated last spring that it wasn’t even thinking about thinking about when it might start tapering. The Atlanta Fed model called for robust growth close to 10% at the time. Now the Fed finds itself painted into a box to taper at a time when the Atlanta Fed has downwardly revised its GDP growth model to below 1% growth. That’s what happens when you lead from behind – you find yourself responding too late when your actions may cause more harm than intended. The national debt is up a little over $2 trillion over the past four quarters, as reported by the St. Louis Federal Reserve. The Fed has been creating money to purchase $80 billion in Treasuries and $40 billion in agency mortgage-backed securities each month. That’s nearly a trillion dollars of Treasuries over the past year, and half that again in mortgage-backed securities.

Tapering means reducing those purchases by the Fed. Failure to find new buyers for those securities would result in the market moving higher to attract new buyers to meet the rising demand for debt certificates. Fortunately, or unfortunately depending on how you look at it, there has been an increase recently in foreign buyers of securities, but that may change if the Bank of Canada and the European Central Bank raise their rates later this week. Either way, the risks of higher interest rates are rising with the prospect of tapering, which should have been initiated long ago when the economy was rapidly expanding. The above dynamics change even more if Congress successfully passes increased spending initiatives that require even greater volumes of debt certificates to be purchased.

The other factor to monitor in next week’s Fed action will be any discussion of interest rate hikes. The potential rate hikes mentioned above are the product of reduced demand for securities. The Fed only controls the very short-term rates, so mid- and longer-term rates are driven by the market, although influenced by Fed asset purchases. A rapid steepening of the yield curve could push the Fed to raise rates sooner rather than later. Fed Chair Jerome Powell – did I mention that he wants to be reappointed for another term – doesn’t want to start rate hikes until 2023. However, the Fed is increasingly coming under criticism for being too slow to act, risking runaway inflation like we saw four decades ago. That necessitated drastic actions by Paul Volker that pushed interest rates into the high teens. Stagflation is the concern, which features high inflation within a stagnant economy. We have persistent inflation now. We’ll see the third quarter GDP data on Thursday to reveal whether the economy is stagnating.

Commodity inflation has long been a part of the inflation story largely ignored by the talking heads in Washington and at the Fed. There are varying reasons for the commodity inflation. There have certainly been some supply disruptions created by Covid that affected some commodities, but not all. Weather threats also reduced the supply of some commodities, along with a plethora of other factors. But demand was impacted by policy in nearly every commodity as fiscal and monetary stimulus put more money into the consumer’s hands here in the States, as well as in virtually every major economy of the world. Let me illustrate it this way. Your spending habits would change if I gave you $100 million. Stimulus didn’t put $100 million in your wallet, but it collectively put hundreds of billions of dollars into the wallets of the U.S. consumer, with similar actions taking place in other major economies. The increased demand created supply chain disruptions when combined with some of the above supply threats. This is a factor largely overlooked by those who advocate for Modern Monetary Theory.

The Ag commodities came under light selling pressure overnight, although traders will be watching the outside markets closely for money flow cues as we move through the day. Crude oil prices pulled back from yesterday’s fresh seven-year highs, but energy prices remain the poster child for commodity inflation. There are growing cries for $100 per barrel crude oil feeding the current money flow, with even one projection on Wall Street for $200 per barrel prices. That impacts fertilizer prices, which impact future crop prices. Keep your eyes on the edible oils.

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Perspective: Morning Commentary for August 7

August 7 – The U.S. economy unexpectedly lost 23k jobs in July, dramatically below market expectations of an 80k increase and marking the worst Non-Farm Payrolls print since February. Furthermore, May and June were both revised sharply downward, with combined revisions showing 103k fewer jobs than previously reported. Outside of the healthcare sector, which added 22k jobs in July, the losses were very broad-based. Government payrolls saw the largest decline, shedding 53k jobs in July, the largest seen since October 2025, while June was revised down to show a loss of 10k jobs as well. The private sector at least saw growth, adding 30k jobs in July, now matching the month prior after it was revised down from the 49k initially reported, and substantially missing forecasts of 78k jobs being added. This is a sharp reversal in course from the largely better than expected U.S. labor data seen earlier this week.

Mike CastleFri, 07 Aug 2026, 13:26

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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: Mid-Day Commentary for August 5

August 5 – The Dow Jones is ripping higher for yet another session, up safely over 500 points at the time of this writing to carve out another record high; the S&P and NASDAQ are a bit less enthusiastic but the former is still making its own record high, while the latter is less than 500 points off its own top thanks to a strong ongoing week of trade. The dollar is churning lower this morning in an effort to re-test Monday’s 1 ½-month low, while the ten-year note has flipped higher in the mid-morning hours. The CME FedWatch tool interesting has market odds of a quarter-point rate hike next month coming closer to a 50-50 proposition as crude oil prices decline.

Mike CastleWed, 05 Aug 2026, 15:19

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