The past couple of weeks have not been too different in terms of news and the markets. If there is hope for stimulus, the market goes up and if approval of additional stimulus seems threatened, equity markets go down. The S&P 500 index ended last week in positive territory, yet this week the index is in negative territory as signs of additional stimulus pre-election have diminished.
In previous posts we have looked at Tesla’s earnings announcements. Yesterday, the company reported an increase in sales of 40% and another profitable quarter. Increased car sales in times of uncertainty and economic troubles related to the Covid 19 virus is quite impressive. The fifth profitable quarter milestone is another step in the right direction for the company. Time will tell the potential for the addition of Tesla to the S&P 500 index and all that entails for investors.
While investors in the U.S. are waiting for news on stimulus talks, the agricultural markets have been on the move. Countries around the world are preparing against any pandemic related disruptions in exports and imports. One area where countries can prepare is through increasing stockpiles of food. Stockpiling puts pressure on countries that export commodities like wheat, soybeans, corn, soybean meal, etc. Furthermore, a weaker dollar and expectations of higher inflation drive commodity prices higher, causing investors and trend following funds to get on board.
Dry weather in Russia, one of the world’s top wheat exporters, exacerbated by China’s enormous demand have pushed prices higher for the commodity.
Wheat Future Active Contract (W A Comdty)
Maize Future Active Contract (EPA Comdty)
Soybean Meal Future Active Contract (SMA Comdty)
While these charts look bullish and commodity investors have benefited from price gains, many countries that have been adversely affected by the pandemic are being put under more pressure as the price of food staples continue to increase. Unlike China, which has had a rapid recovery from the pandemic, developing countries are suffering the consequences of increasing agricultural prices.