Commodity and Currency markets should be a warning to all Asset Classes.
Perhaps one of the surprising trends over the past month or so has been the weakening of the US Dollar, while at the same time oil and commodity prices (which are priced in US Dollars) are falling, and with moving averages crossing, the correction looks set to continue, which may be warning to all asset classes.
I warned in December that US GDP would be significantly weaker in Q1, potentially zero, therefore 0.7%, the weakest in 3 years, was slightly higher than I originally anticipated, but lower than market expectations.....to justify expectations of 3% and 4% for 2017, the economy now needs 3 consecutive quarters of 3.75% to meet the lower expectation.
At the end of February, I warned of the over speculation in commodity markets, with excessive positioning boosted by high expectations, in Oil, Copper, Steel and Iron Ore markets. At the time, forecasting a fall in oil and commodity prices was very much non-consensus, and many commentators forecast oil to break above $55, and Iron Ore over $100, but within a week, markets started to turn lower, oil falling 9%. Copper prices have fallen from 6110 to 5500, and Iron Ore prices, that were attempting to break record levels, have recently entered Bear market conditions.
The true condition of consumers can be seen in Disposable Personal Income, which increased $121.0 billion, (3.4%), from $141.6 billion, (4.1%) in Q4, while Real Disposable personal income increased by just 1%, compared with an increase of 2% in Q4. While Disposable Incomes fell, personal saving as a percentage of disposable personal income was 5.7%, compared with 5.5%, as Personal saving increased $814.2bn in Q1, compared with $778.9bn.
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