• The House impeaches President Trump
  • Stability in gold and silver while gravity hits palladium
  • Copper over $2.80 per pound and crude oil rises to over $60 per barrel
  • Grains move higher across the board
  • All-time highs in the stock market

The story of this week:

 

The Stock Market Ignores A Significant Political Event

 

I remember the impeachment of Richard M. Nixon in 1974 like it was yesterday. As a teenager with an interest in politics, I watched the Watergate hearings with great enthusiasm. The impeachment process started on October 30, 1973, and lasted until he resigned from office on August 9, 1974.

The impeachment of William Jefferson Clinton lasted from October 8, 1998, through December 19, 1998. The Senate acquitted President Clinton on February 12, 1999.

On December 18, President Trump became the third US President impeached by the House of Representatives. While the first attempt to impeach the current President date back to December 2017, the official impeachment inquiry that led to two articles of impeachment began on September 24, 2019. The historic move by the House of Representatives set two precedents; one for speed and another because a trial will occur in January 2020, a year where President Trump will receive the nomination of his party for re-election.

The nation was on the edge of its seats during the Nixon and Clinton impeachments. Last week’s move against President Trump was different. Not one Republican lawmaker in Congress voted to impeach the sitting President making the act partisan. The Founding Fathers and authors of the US Constitution warned that a partisan effort to remove the sitting President from office could harm the political system. If the vote along party lines in the House was a sign, a Senate acquittal in January is a no-brainer as the body that will act as jurors is under Republican control, and conviction on the two articles require a two-thirds majority.

The stock market ignored impeachment last week as it rose to new record highs in the wake of the most significant political event in the US this century.

Source: CQG

The weekly chart of the S&P 500 E-Mini futures contract highlights that it finished on Friday, December 20, with the fourth consecutive week of gains. At the 3220.25 level on Friday, the futures contract was a record high along with all of the leading stock indices.

Impeachment is a scarlet letter for the President as he seeks re-election in 2020, but it may be the only one. The US economy is the envy of the world when it comes to economic growth. Unemployment is at the lowest level since the 1960s. The stock market continues to rise to new record highs. All of these factors would typically guaranty the re-election of a sitting President of the United States as citizens tend to vote with their pocketbooks. However, the unprecedented degree of political divisiveness in the US is likely to lead to a highly contentious November 2020 contest. Even though stocks moved higher throughout the House’s impeachment of President Trump last week, we could see lots of volatility as the next election approaches. Tax and regulatory reforms under the Trump administration fueled the stock market. Many of the policies offered by opposition party candidates could create significant shifts if the Democrats win the White House in November 2020. Fasten your seatbelts for 2020, the markets may have ignored impeachment, but they are not likely to do the same during the election season.

When it comes to commodities, trade trumped impeachment over the past week. Copper was above $2.80 per pound, NYMEX crude oil was north of $60 per barrel, and grains made significant gains since the “phase one” trade deal with China. At the end of last week, the House approved the USMCA trade deal with Canada and Mexico, which the Senate will pass. While the House of Representatives impeached President Trump on December 18, he will go into the 2020 election after fulfilling campaign promises made in 2016. Stay tuned for a wild year that will set the stage for the new decade that begins on January 1.

 

Highlights in commodities:

  • February gold falls just 0.02% and settled at $1480.90 per ounce
  • March silver rises 1.25% on the week as the volatile precious metal settled at $17.224 per ounce
  • Platinum posts a 1.61% loss on the week. January platinum was at a $567.10 per ounce discount to February gold futures, which widened since last week
  • March palladium moved 4.37% lower for the week as it corrected to just over $1800 per ounce after reaching a new record high at $1974.60 on December 17
  • March copper moved 0.90% higher as the red metal sits at the $2.8060 level
  • January iron ore futures moved 2.43% lower on the week
  • The BDI fell 12.03% since December 13 to the 1221 level
  • January Rotterdam coal fell 2.55% since last week
  • January lumber moved 2.15% higher since December 13 as the price moved above the $410 per 1,000 board feet level
  • February NYMEX crude oil moved 1.26% higher since December 13 on the back of the trade and OPEC output cuts
  • February Brent crude oil moved 1.46% higher since the previous report as Brent outperformed NYMEX crude oil
  • The premium for Brent over WTI in February closes Friday at the $5.69 level up 49 cents since last week
  • February gasoline moved 2.78% higher while February heating oil futures rose 2.04% over the past week
  • The gasoline crack spread in February was 11.41% higher while the February heating oil crack moved 3.96% higher since December 13 as products outperformed crude oil despite inventory increases
  • Natural gas rose 1.39% on January futures closing the week at $2.328 per MMBtu. The EIA reported a withdrawal of 107 bcf from storage on Wednesday for the week ending on December 13
  • February ethanol moves 2.16% higher on the week
  • January soybeans rose 2.29% since last week on the back of the trade deal
  • March corn rose 1.77% on the week as the corn followed the beans
  • CBOT March wheat rose 1.83% since last week. March KCBT wheat trading at an 80 cents discount under March CBOT wheat down 9.75 cents since December 6. The discount moved towards the historical norm since last week
  • March sugar rose 0.30% since December 13
  • March coffee posted a 0.15% loss but rose to the $1.4245 level in volatile trading
  • March cocoa fell 6.03% since December 13
  • March cotton moved 1.74% higher since last week on the back of the trade deal between the US and China
  • January FCOJ futures rose 3.39% since the previous report
  • February live cattle fell 1.37% since last week
  • January feeder cattle were 0.96% lower since December 13
  • February lean hog futures rallied 1.69% over the past week on rising hopes for US exports to pork-starved China
  • The December dollar index futures contract rose 0.54% on the week
  • March Long-Bond futures trading at 156-07 down 1-29 for the week
  • The Dow Jones Industrial Average closes at 28,455 on Friday, December 20, up 320 points from December 13. The S&P 500 rose by 1.65% since last week. The VIX was trading at around 12.51 on Friday down 0.12 on the week as the stock market rose to record highs
  • Bitcoin was trading at $7,231.19 on Friday down $33.79 or 0.47% since December 13
  • Ethereum was trading at $129.04 on Friday, down 10.74% since the last report

 

Price Changes for the week:

DBC closes at $16.11 per share, up 24 cents since December 13

 Source: Barchart

DBC is the Invesco DB Commodity Tracking product which represents a diversified basket of commodities futures contracts, has net assets of $1.34 billion and trades an average daily volume of 1,007,709 shares. The fund summary for DBC states that it holds a diversified group of commodities futures but is weighted towards energy. The average volume fell over the past week while the net assets remained steady, and the price of the ETF was posted a gain.

Any investment involves substantial risks, including, but not limited to, pricing volatility, inadequate liquidity, and the potential complete loss of principal.  This document does not in any way constitute an offer or solicitation of an offer to buy or sell any investment, security, or commodity discussed herein, or any security in any jurisdiction in which such an offer would be unlawful under the securities laws of such jurisdiction.