While the commodity markets have been in a downturn for nearly four years, tariffs could move money out of equities and into commodities. Doug Werling with Bower Trading explained how this could happen on AgDay earlier this week.
“We will get an increased price that we pay as a consumer because of these tariffs. The companies well, how much will they absorb? How much have they already absorbed? They're going to pass it on the consumer [and] that acts like a tax that's like higher gas prices,” he told AgDay host Clinton Griffiths adding that is a signal to the equities market, but unlike commodities there isn’t a future market for equities. “So, we have increasing interest rates, higher taxes to the consumer with tariffs [and] next thing you know you get into a situation where whether the economy slows down a little bit. So, you’ll see the equity market pause.”
While a lot of funds managers are short in many of commodities markets, when they decide to get out of said equities to lighten the risk to take profits, they'll look to do the same in commodities, Werling explained.
“So, you'll see some markets that have trended down most of the year trading higher as of recent and vice versa, they have to change those positions,” he said. “You should see it at some point, money come out of equities and into the commodities, even though tariffs are there. It could help the grain trade more than people realize.”