A new year always presents new challenges, but it seems this year is a pivotal year. Since the fall elections a new attitude has evolved. President Obama has found the word “compromise,” and as a result the political landscape has changed markedly.A new focus on jobs, a sense of cooperation, and a resolve to move forward and attack our problems has surfaced. New economic optimism surrounds a slightly lower mid-January unemployment rate and stock markets seem to be forging higher on the back of heightened business forecasts.
Winds of change are sweeping through the halls of congress, which may be too brisk at times as leaders try to react to the wishes of the populace and the need to forge a new economic direction.
But the truth hurts and a strong dose of realism is set to engulf Washington and citizens in general, and it can create change at an accelerated rate. That could mean occasional wild reactions in our markets, forcing all to focus intently on risk management and expeditiously taking advantage of opportunities when presented.
Two wild cards are challenging the markets identity going into the new year: regulatory and government actions to limit speculative activity in the marketplace, and a continuation of political instability around the world amidst an unpredictable two-war atmosphere. Both influences can create short term reactions by the markets and could change attitudes going forward. More regulation is in our future, which will create less liquid markets, higher volatility, expanded derivative exchange margins, more OTC trade, and in general, expanded cash trader margins.
Importantly, we start the year with many markets into new highs following a brisk advance in the last 6 months. Agricultural markets are in tune with the need to advance production all around the world. The far east economies continue to be the demand drive and the weather patterns of the last year seem to be just that, a pattern of instability—too hot or too cold or too wet or too dry. With this backdrop we go forward into 2011. Markets with rationing statistics could develop quickly into dynamic upside price action this year. It would just take a spark. Markets with a food emphasis could be the end result. Be on alert.