Those Swiss Miss Hot Chocolate packets you stashed away in your “survival” box a couple years ago might prove to be the smartest “accidental” financial move you’ve made since buying the Forever postage stamps when they were first issued at $0.41.
The price of cocoa has gone parabolic.
Cocoa trades today for more than $9,800 per ton. That’s its highest price – ever. It’s up 130% since January. It’s up 240% over the past year.
Just look at this chart…
This isn’t some hot Artificial Intelligence stock. It’s not a speculative crypto-coin.
This is cocoa. It’s a staple of the American diet. And, its rapidly rising price is a sign that inflationary pressures are still alive and well.
Anyone who expects the Fed to start lowering interest rates while cocoa and other agriculture prices are rising like this needs to adjust that thinking. It isn’t going to happen.
Of course, I made the “no interest rate cuts anytime soon” argument just before the FOMC meeting earlier this month. Chairman Powell then threw egg on my face by announcing that he could see a path to as many as three interest rate cuts some time later this year.
But, saying it and doing it are two different things.
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Remember, it wasn’t too long ago that the Fed talked about inflation being “transitory.” Heck, not long before that, the Fed was worried that inflation was “too low.” Wouldn’t it be nice if we had that problem again?
It seems to me the Fed’s track record when it comes to gauging the path of inflation is spotty at best. And, it’s hard to see how the Fed can justify lowering interest rates as early as June.
The market is slowly reaching that same conclusion. The probability of a rate cut in June has dropped from 60% two weeks ago to 55% today. It should continue to fall.
And, to the extent that stocks and bonds have rallied in anticipation of a June rate cut, those assets are vulnerable to a decline as the markets realize it isn’t going to happen.
Best regards and good trading,
Jeff Clark
Editor, Market Minute