The U.S. Gross Domestic Product grew at its fastest pace in years, starting 2018 off with a bang. Economic activity in the rest of the world was also quite robust. Storm clouds began to gather however and in early spring, global central bankers, led by the U.S. Federal Reserve, began to tighten credit conditions. Tighting credit unwound the decade long accommodative posture implemented after the great recession ten years earlier and with an eye toward rising inflationary pressures and expectations.
As the year progressed, increased trepidations about the contractionary impact of rising tariffs and trade tensions spurred by the Trump administration, triggered fears of plateauing or even contracting economic growth both here and abroad. These fears began to weigh on all financials including the stock, capital and commodity markets.
By year's end, the equity markets were in full retreat with market action in December supposedly the worst since the Great Depression year of 1931. Dysfunction in Washington combined with a government shutdown and weak data reported out of China daily gave investors pause given the shaky state of the world's two most powerful economies.
Given this backdrop, our final post of the year shows the net percent price move for a number of key commodities and indices for 2018 as of December 28th, along with a measure of price volatility called the coefficient of variance (CV) which is the standard deviation of the year's price movements divided by the annual average.
No surprise that two key industrial commodities crude oil and lumber posted the year's largest losses, both off 25.7% with unleaded gasoline actually off 27.5%.
With regard to the grain and oilseeds, the Chinese boycott of U.S. soybeans resulted in that market down by 7.1% with soybean oil pressured more than soybean meal as that market was off by 17.1% with the latter essentially unchanged. The grains fared better linked to lower stockpiles led by wheat up 20.1% for the year.
With the exception of cocoa, all the softs were lower along with the industrial and precious metals complex. Rising interest rates helped support the dollar though bond and stock values were lower.
With regard to volatility, lumber and natural gas had the highest CV values while relatively tranquil weather this year resulted in many of the agricultural contracts seeing muted price volatility for most of 2018.