Latest / Bull Market Conversations with Fexingo: Rallies, Momentum, and Riding Market Strength / Why Corn and Wheat Are Beating the S&P 500 in This Bull Market
Transcript
- Lucas: So the S&P 500 is sitting at 7,712 as of today, basically flat over the past week. But the real action this week has been happening somewhere else entirely — in the grain pits, if people still call them that. Corn and wheat just hit their highest prices in more than three years. Luna: That's a big deal. I mean, we talk about tech and AI data centers all the time, but corn and wheat? That feels like an old-school market surprise. Lucas: Exactly. And if these conversations have helped you think about your portfolio or even just understand what's moving markets, the smallest way to keep it ad-free is a coffee at buy me a coffee dot com slash fexingo. Honestly, if today's episode saves you one bad trade, that's worth a coffee right. Luna: Yeah, it's a tiny gesture that keeps us going. Now back to the grains — what's driving this spike? Lucas: Let's look at the numbers. The latest data shows corn and wheat prices jumped to their highest level in over three years, and this isn't just a blip. We're talking about a sustained move over the last several months. The question is why, and what it tells us about the broader economy. Luna: I've seen some talk that it's weather-related. Is that the main driver, or is there more going on? Lucas: Weather is definitely part of it. There have been drought conditions in key growing regions, and that's a classic supply shock. But there's also a geopolitical layer. With the rhetoric between the U.S. and China heating up again, especially around trade, there's a real risk to agricultural exports. That adds a risk premium to grain prices. Luna: So it's supply and demand, but also political tension. That's a lot of variables. Lucas: Right. And here's where it gets interesting for the bull market narrative. We often think of this rally as being driven by tech and mega-cap growth, but commodities are having their own moment. If you look at the five-day performance, the Russell 2000 is up 0.6 percent while the S&P is flat. But grains are up considerably more, and that's a divergence worth paying attention to. Luna: Is there a way for everyday investors to play this? I mean, corn and wheat aren't exactly easy to buy directly. Lucas: There are commodity ETFs, like ones that track agriculture futures. But the bigger point isn't necessarily to chase grains. It's to understand what this price spike says about inflation and the Fed. Luna: Oh, right. Because food prices are a big part of CPI. Lucas: Exactly. And that's the crux. The Fed is looking at a September meeting where a rate hike is literally a coin flip. Some of that uncertainty is tied to the new Fed chair, Kevin Warsh, and his hawkish stance. But if grain prices keep climbing, that feeds into food inflation, which makes the Fed's job harder. Luna: So we could see higher rates for longer if this keeps up. Lucas: Potentially. The Fed funds effective rate is sitting at 3.63 percent, and it's been flat. But if inflation ticks up because of food and energy, they might have to act. And that's a headwind for the stock market, even if it's still near record highs. Luna: It's interesting because the market seems to be ignoring some of these risks. Like, GDP growth slowed to 1.5 percent annualized, but stocks don't care. Lucas: That's the thing about bull markets. They can climb a wall of worry. But sometimes the wall gets too high. The agricultural rally is a reminder that there are real economy forces at play that aren't reflected in the NASDAQ. Luna: So what do you think — is this a buying opportunity in commodities, or just a short-term spike? Lucas: I'd be cautious about chasing the spike. But structurally, there are reasons to think agricultural prices could stay elevated. Climate change is making weather patterns more extreme, and geopolitical tensions aren't going away. That's a recipe for continued volatility in food prices. Luna: And volatility is something we can all relate to in this market. Lucas: Absolutely. But here's the thing for long-term investors: even if you don't want to trade grains, you should be aware of how these cross-currents affect your portfolio. If inflation picks up, sectors like consumer staples might get hit, while energy and materials could benefit. Luna: That's a good point. We often get caught up in the latest tech earnings, but the old economy still matters. Lucas: And that's exactly why we're talking about it today. The S&P 500 and the Dow are at record highs, but the real story this week was in the grain markets. That divergence tells you something about the fragility of this bull market, and maybe about where the next risks lie. Luna: So if someone wanted to learn more about this, what should they look at? Lucas: Start with the USDA's crop reports, which come out regularly, and watch the weather forecasts for the Midwest. Also, keep an eye on any news out of the U.S.-China trade talks, because that can swing prices quickly. Luna: And for the Fed, we'll be watching that September meeting. Lucas: For sure. A lot hinges on that decision. And if you want to stay ahead of these kinds of moves, we'll be here breaking it down every day. Luna: Until next time, keep your eyes on the markets, and maybe on the cornfields too.