3 Reasons Why A Trade Deal Gets Done – More Good News For Commodities

(Seeking Alpha) – The first of three significant events on the schedule for markets in the United States and around the world until the end of March will be the short-window when it comes to the reprieve of the most prolonged government shut down in US history that last for over one month. It is unlikely that the President will move to shut down parts of the US government again even if he does not receive concessions from the Congress over building a border wall along the southern border of the United States. It is possible that President Trump will declare a state of national emergency where the courts will eventually rule on if the President gets to fulfill his campaign pledge of increased security along the US border with Mexico.

The second event will be the decision on Brexit. Prime Minister’s plan for the divorce from the EU went down in flames in Parliament, and both sides now face the very unpleasant prospects of the hard Brexit on March 29. On that day, the UK will cease to be a member of the EU, and without a plan for the exit, the event could cause mass confusion when it comes to trade, immigration, borders, and other issues. However, the most likely event will be an agreement to extend the period of negotiations, perhaps forever given the positions on both sides of the fence in the UK and the EU.

Finally, the most significant issue facing markets across the globe is the current trade dispute between the US and China that has created a wave of protectionist moves. Commodities are on the front lines when it comes to tariffs and retaliatory trade moves, and last week, the US Fed injected some optimism into the asset class when they backed off their hawkish approach to monetary policy. However, it will be the trade issue that either ignites raw material prices further in the coming weeks or weighs on them as we have seen during the second half of 2018. The Invesco DB Base Metals ETF product (DBB) is a liquid basket of copper, zinc, and aluminum that moves higher or lower with the nonferrous metals. The Teucrium Soybean ETF (SOYB) provides an alternative to the soybeans futures market that trades on the CBOT division of the CME. Soybeans and base metals are commodities that have been in the crosshairs of the trade dispute between the US and China.