Navigating the intricacies of the business cycle requires a nuanced approach, a perspective often overlooked by economists and financial pundits. Both US stock indexes and Treasuries are currently experiencing long-term uptrends, with the latter turning bullish at the close of November 2023. Meanwhile, the outlook for commodities is varied, with fundamental indicators not as optimistic as in previous years.

As we approach the conclusion of 2023 amidst the holiday season, speculation arises regarding which market sector may emerge as the frontrunner in 2024. The contenders include US Treasuries, US stock indexes, and commodities. In this analysis, we will explore expectations for each sector, acknowledging the potential wildcard of the upcoming US Presidential Election in November and its subsequent impact on the market.

The conventional business cycle, often likened to seasonality, serves as a guide rather than an inflexible rule. This cycle, characterized by stages such as bonds turning up, stocks turning up, and commodities turning up, can provide insights but should not be treated as absolute. Notably, recent economic dynamics have challenged traditional market absolutes, underscoring the need to embrace flexibility in analysis.

Reviewing the long-term trends, US stock indexes entered an upward trajectory in October 2022, while US Treasury futures followed suit in November 2023. However, the commodity sector presents a mixed picture, with various segments displaying diverse long-term trends.

This divergence raises intriguing questions for the upcoming year:

• Can US stock indexes sustain upward momentum and attract continued buying interest? The Dow Jones Industrial Average ($DOWI) reached a new all-time high in late December 2023.
• Will the uptrend in bonds persist, or will it be influenced by the US Federal Open Market Committee’s (FOMC) stance on interest rates? Chairman Powell’s mention of potential rate cuts totaling 75 basis points in 2024 adds an element of uncertainty.

The commodities landscape introduces further complexity. Notably, the “Three Kings” — crude oil (WTI and Brent) and gold — offer insights into potential trends. Crude oil has experienced a long-term uptrend since August, while gold’s outlook remains uncertain, with a potential bearish reversal pattern emerging by the end of December.

Corn, representing the broader commodities sector, has been in a downtrend since May 2022. Despite signs of a potential bullish turnaround, a conclusive reversal pattern has yet to materialize.

Considering the current economic landscape, where US stocks and Treasuries show bullish momentum and commodities face uncertainty, a scenario emerges where capital may flow out of commodities and into the former two, bolstering their long-term uptrends. It’s worth noting that this shift may not necessarily be as bearish as it seems, as short-covering rallies could drive markets higher despite a lack of fundamental support.

In summary, the outlook for 2024 suggests a continuation of the long-term uptrends in US stock markets and Treasuries, while commodities grapple with maintaining bullish momentum. The intrinsic value of the cash corn index, based on previous analysis, points toward a potential new low in the spring of 2024. As we anticipate these market dynamics, the upcoming US Presidential Election looms as an additional factor that could shape the economic landscape.

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