Election shapes the futures

Myriad factors influence futures prices constantly — some obvious and rational, others counter-intuitive and mysterious. Analyzing the influence of the election while the world is spinning is impossible, but we’ll share some data without attempting an explanation. These observations began at 6 p.m. Central on Nov. 6 as pundits and pollsters were describing the impending Republican landslide.

The first dramatic moves occurred with the U.S. dollar blasting upward and Dow futures roaring up nearly 1,600 points. Foreign currencies, especially the yen and euro, tumbled along with treasury bonds for the 12-hour period ending at 6 a.m. on Wednesday. The Dow stalled on Thursday after having closed at a record high the previous day. Crude oil started Tuesday evening slightly higher, rose to $72.50 per barrel, fell below $70 on Wednesday morning, and then shot back up to $72.50 by Thursday’s close. Gold and silver fell late Tuesday night and finished sharply lower by Wednesday’s close. Corn, wheat and soybeans stumbled briefly, but then rallied on Thursday with corn gaining more than 10 cents per bushel during the 48-hour period.

Tariffs: Tariff-ic or terrible 

The Treasury Department’s Council of Economic Advisors perhaps best summarizes the views of leading economists in observing some characteristics of U.S. tariff policies. The Council notes that tariffs can be used to protect against unfair trade policies.

However, these tariffs come with a variety of potential issues. Though in early U.S. history, tariffs raised significant income for the government, today only 2% of tax revenue comes from them. In addition, retaliatory tariffs can reduce U.S. exports.

Tariffs can also raise prices for consumption goods and increase inflation by three fourths of a percent. They can cause a decline in domestic output and productivity, add to unemployment and unfairly burden the lowest income brackets who stand to see their earnings decrease by 2.3% compared to a decrease of only 0.5% by the top 1% of earners.

Balancing the relative value of tariffs has become a major political issue. Recent reports by the American Soybean Association and National Corn Growers Association warn that U.S. exports to China could decline by 50% and 84% respectively, if threats to impose 60% tariffs on Chinese imports are carried through by President-elect Trump.

Friday’s markets

CME midday prices: December metal: Gold, $2,696 per troy ounce; silver, $31.47 per troy ounce; copper, $4.31 per pound. December crude oil: $70.40 per barrel. Produce per bushel: January soybeans, $10.28; December corn, $4.31 December wheat, $5.72. December livestock per 100 pounds: Cattle, $183.80; hogs $80.50.

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