Investors are worried about rising interest rates in the bond market, and rightly so. It is my hope that this isn’t the beginning of a sustained period of rising interest rates. With the commodity price cycle still in full swing, it is definitely a possibility.
Petroleum-based commodities have already experienced their upswing in prices, as have precious metals. Now, it’s my belief that agricultural commodities prices will have their turn with a sustained upswing in prices. This will be the last leg of the current commodity price cycle, and very welcome in the agricultural economy.
Commensurately, inflation will be a problem. In fact, I think it’s really quite amazing that we don’t have more inflation in the economy than we’re currently experiencing. I guess we can thank a slowing economy for this.
This leads me to believe that if we do experience a resurgence in economic growth while we’re still in the current commodity price cycle, interest rates will have to go much higher. This would not be good for the stock market.
But you can examine all the fundamentals as much as you want — we’re still all just guessing as to how things might turn out. I’m pretty confident about the commodity price cycle moving to the agricultural sector. It’s already happening. This is good news for rural economies, because virtually every dollar a farmer makes from his or her business goes right back into the local economy.
I can’t tell you how things will play out over the next few quarters; only, I think it’s time for some caution. Stock market speculators have had such a good run over the last 18 months. A little break is not unreasonable.