After hitting new highs continuously, Zheng Mian experienced wide fluctuations under the influence of the external market, market panic was also ignited, and various “cyclical theories” and “turning point theories” became rampant. Looking at this round of commodity market trends, the adjustment and cooling at this time may be for a healthier rise in the future.
Currently, the Fed’s “releasing water” and the rapid recovery of the economy have intensified inflation expectations. Generally, policy will turn after the U.S. 10-year Treasury bond yield reaches 1.5%, and it has now reached 1.6%. Although Federal Reserve Chairman Powell once again emphasized that he would not raise interest rates, relevant institutions have begun to short Treasury bonds on a large scale, leading to a moderate adjustment in the market.
In addition, the sharp adjustment in crude oil also contributed to the fall of commodities to a certain extent. On March 4, the OPEC oil organization will meet to discuss production issues. Judging from news leaked by relevant media, given that oil prices have risen to pre-epidemic levels, oil-producing countries may increase production to alleviate market shortages. Affected by this expectation, crude oil adjusted and fell below the important mark of $60/barrel.
The author believes that the above two events are not enough to reverse the macroeconomic trend. According to historical K-line trends, generally the commodity market will experience a rising period of about 2 years after a major crisis. Take cotton as an example. When the global financial crisis broke out in 2008, Zheng cotton started a bull market for two consecutive years after reaching its lowest point at the end of 2008. The amount of global currency injection during the 2008 financial crisis was far less than this time. Therefore, including the new low in March 2020, it has only been exactly one year. At this time, it is too early to assert that the economy or commodity growth has reached an inflection point. The more bullish the market, the more violent the fluctuations will be, and changes in macro trends often require great strength and a long time.
The author believes that crude oil will continue to rise in the future. According to the historical K-line, the current price is far from the high point of crude oil. There is still a certain space in the future. With the recovery of the global economy and consumption, the demand for crude oil will only increase. It is getting bigger and bigger, and frequent geopolitical problems in the Middle East will cause great uncertainty in crude oil supply.
The current rise in U.S. bond yields has suppressed commodity prices in the short term, lowered inflation expectations, and accumulated more momentum for the market outlook. In this sense, it can be regarded as a healthy correction. The author also believes that we should be cautious about the future cotton market and not have too high expectations. After all, cotton prices have risen to high levels, and it is unrealistic to continue last year’s increase. </p