• There is a predictability to the chaos created in global markets by the current geopolitical situation. 

• This is one of the reasons predictive market websites are adding commodities to their “trader” offerings. 

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• All while the reality of the global economic situation remains unchanged. 

  

My plan was to put this piece together over the past weekend, but I knew how the time from last Friday’s close through Monday morning’s open in US markets was going to go. Recall the euphoria in global stocks as last week came to an end, with the S&P 500 ($INX) and Nasdaq ($NASX) going to new all-time highs on the weekly social media post from the US president to do just that – rally US stock markets into the weekend. This one proclaimed the Strait of Hormuz (aka Strait of ‘Vermouth’ according to US Treasury Secretary Bessent) was “COMPLETELY OPEN AND READY FOR BUSINESS” (emphasis the US president’s, reportedly, not mine). As I’ve said many times over the past 10 years, a rational human being would realize there was just another not necessarily the Truth Social media post. But algorithms aren’t rational human beings, oddly fitting with what John Maynard Keyes said about many decades ago, “Markets can remain irrational longer than you can remain solvent”. 

Before global investors had a chance to sober up from Friday night’s celebration, early Saturday morning saw the headlines change to, “Iranian gunboats fire on tanker in Strait of Hormuz as Tehran reimposes restrictions”. Then came Sunday, when the headlines screamed, “U.S. struck seized Iranian-flagged ship in Gulf of Oman”. When the commodity complex opened Sunday night, there were no surprises as Energies quickly rallied and US stock index futures fell. WTI crude oil (CLK26) gained as much as $7.35 (8.8%) while distillates (HOK26) added as much as 30.25 cents (8.9%). Meanwhile, S&P 500 futures (ESM26) fell as much as 76.5 points (1.1%) with Dow Jones Industrial Average futures (YMM26) dropping as much as 551 points (1.1%). 

Over in the Metals sector, it was also more of the same. June gold (GCM26) opened the week with a quick loss of $127.60 (2.7%), fitting with what I told Kitco News in its weekly poll on expected market activity last Friday. May silver (SIK26) acted like it was in a music video for Tom Petty’s classic song “Free Fallin’”, sliding as much as $3.127 (3.8%). Dr. Copper, the May contract (HGK26) of the economic indicator market, lost as much as 14.2 cents (2.3%) while platinum and palladium both fell as well. 

Was any of this surprising? “Not remotely.” (Extra points for knowing what this quote references. Think, “Inconceivable!”) As I discussed late last week, Barchart’s Elizabeth Volk sent me an article talking about how predictive market sites are adding commodities to their “traders”, including the dynamic duo of natural gas (aka The Widow Maker) and wheat (aka Poverty Grass). As I concluded my piece on the subject, “Good luck”. More importantly though, we don’t necessarily need predictive market sites to know what is going to happen week to week, or even day to day. While I make no guarantees, the general pattern goes something like this: 

• The US president posts something bullish for US stock markets heading into the weekend. Remember, his only measure of the economy is stock indexes. Markets react accordingly with stocks higher and energy markets lower.
• At some point during the weekend, reality rears its ugly head and headlines return to the ongoing war. This sets the stage for a lower open to global stocks and higher energy markets.
• For whatever reason, when crude oil rallies, gold has been falling. Does this make sense? No. But again, markets do not have to act rationally.
• After a lower close by stocks to begin the week, the US president will again post something bullish, leading to Typical Turnaround (TACO) Tuesday trade. And the cycle begins again.

While all this is going on, the situation of rising inflation doesn’t change. This past weekend, a couple other news items went nearly unnoticed. I pulled these headlines from CNBC.com Sunday: 

• Businesses can claim refunds for (the US president) tariffs ruled unconstitutional starting Monday (April 20)
• Gas prices may not drop below $3 a gallon until next year: Energy Secretary Wright

While both topics stood out to me, obviously, the latter tied into a question my friend Michele (from Italy) sent me late last week. He asked, “U.S. consumers are spending more than they did a year ago and have not yet slowed down spending across all sectors. Historically, it often takes several months for consumers to reduce spending levels in other categories to adjust to rising oil prices…the same is expected to be seen in the second half of the year. Where will they cut spending to compensate for rising gasoline prices…?”

This ties into a piece I worked on with Elizabeth a few weeks ago, one I will be talking about with Stocktwits Tuesday (April 21). I said then I thought one of the first markets to see a shift in US consumer demand would be high-priced beef cuts, possibly leading to the old adage of “The cure for high prices is high prices” playing out again. Though I’m not a proponent of government reports, it will be interesting to see what the Cold Storage report shows us for beef stocks in relation to lower priced poultry stocks as of the end of March, set for release this coming Friday. Over the weekend, I saw a post from an industry leading analyst that read, “While surveys show more Americans view meat as important to their diets, they might be starting to cut back on beef...according to USDA. It projects beef intake will decline 2% this year…trading down from filet mignon to value cuts like sirloin. Some are pivoting to chicken, which is 30% to 40% cheaper than ground beef…” and so on. 

The bottom line is given the changed dynamics in markets the past decade, most of what happens is predictable. Let’s see what happens. 

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