Investors are proving a fairly patient lot these days, considering the big questions marks around the global economy and the U.S. government itself.
Comments from top White House economic adviser Kevin Hassett a day earlier about “zero” growth for the U.S. if the shutdown doesn’t end soon, are still the subject of some chatter for Wednesday. The day for Wall Street is looking positive so far, but its mettle may be tested later if competing bills to reopen the government go down in flames, as expected.
At least we can look to earnings for some distraction, and decent news on the tech side from Texas Instruments and others has that sector tipped to lead the way higher for Thursday. But it’s not a bad time for investors to look at other assets these days, especially given the “flat and skinny” kind of 2019 that’s being predicted for stocks, as opposed to the creamy caramel-coated foam on top like we got in 2017.
It is early in the year and maybe not a bad idea to look at some diversification options. That brings us to our call of the day from Goldman Sachs’s head of commodities research, David Currie, who says Brent crude is likely to “overshoot” his $67.50 a barrel target this year, as he also reiterates why they love gold so much.
First stop, the sticky stuff and his call is not a far distance away from the $61 where Brent is currently sitting. Currie says the big selloff in December was just an “unwind of exuberance,” and there’s a big point he makes here.
“Demand for oil and commodities is solid. It’s the same boring demand growth we have been seeing since 2016, 2017, 2018 and now 2019 in that a lot of that was sentiment going up and down around that relatively benign demand outlook,” Currie told Bloomberg News in an interview posted Thursday.
And in particular, he said China imports were still up 30% year-over-year in December. Add that to the fact supply is still coming off the market from OPEC and non-OPEC oil-producing countries and demand remains, if not robust, at least benign, Goldman still sees “significant upside” for crude ahead.
If the global economy suffers or is perceived to suffer, oil would take a hit because China and other emerging market nations are big buyers of crude. But Currie thinks that economic sentiment survey-type data swinging hard the other way now from 2017 and early 2018. Most recent data showing what people think will happen is more negative than even the hard data.
As for gold, in a separate interview Currie laid out their three reasons for a bullish view: fear of recessionary risks still make it a good hedge against those possible economic problems; a weak dollar improves the purchasing power of emerging markets, with China and India expected to fuel even more physical demand; and signs of more central-bank buying, from India, China and emerging markets.
Goldman has a 12-month gold forecast of $1,425 an ounce, which is also a fair pace from the current $1,278.40 level.
And he says when it comes to bitcoin vs. gold as hedge, the answer is obvious: “Bitcoin has been trading for five years, gold has been trading for 3,000 years. I’m gonna take gold.”
To be sure, commodities are wobbling today. Crude US:CLU8 is slipping amid the possibility of U.S. sanctions on Venezuela oil as a fresh crisis bubbles away. Gold US:GCU8 is also in the red as the dollar DXY, +0.13% gains, notably against the euro EURUSD, -0.0791% . ECB President Mario Draghi was not too cheery at a press conference following the central bank’s meeting as he discussed rising risks for the European economy.
The Dow DJIA, +0.18% S&P 500 SPX, +0.30% are lower and the Nasdaq COMP, +0.74% is just holding onto gains after U.S. Commerce Secretary Wilbur Ross told CNBC his boss is “miles and miles” from a trade deal with China.
Bristol-Myers BMY, +0.18% American Airlines AAL, +6.07% Southwest LUV, +5.78% JetBlue JBLU, +4.29% and Freeport McMoRan FCX, -6.42% have all reported. After the close, we’ll hear from Intel INTC, +4.21% and Starbucks SBUX, -1.17%
In an interview, Twitter TWTR, +1.26% CEO Jack Dorsey dishes on the cold goat he was once served at Facebook FB, +1.39% CEO Mark Zuckerberg’s house. Meanwhile, Twitter is testing a new “Original Tweeter” hashtag to help users find the source of tweets
After some late-night back and forth tweeting between Trump and Speaker of the House Nancy Pelosi, the president said he’ll deliver the State of the Union address after the partial government shutdown, now in its 34th day, is over. The Senate is due to vote on two competing bills to reopen the government Thursday, but neither is expected to succeed.
The shutdown has stopped a lot of data, but investors got an update on weekly jobless claims, with the Markit manufacturing and services purchasing managers index surveys and leading economic indicators still to come.
$867 million — That’s how much Spain’s Real Madrid generated in the 2017-2018 season, which makes it the richest football club in the world. According to the Deloitte Football Money League, the Madrid team has replaced Manchester United, which dropped to third behind Barcelona.
Author: Barbara Kollmeyer
Source: MarketWatch | Why Goldman’s commodities chief thinks oil will rise 10% plus this year