The slowing of commodity prices eased cost pressures on households, companies and helped the markets and exchange traded funds (ETFs).  According to the Reuters/University of Michigan survey, consumers’ sentiment improved slightly in August. 

Timothy R.  Homan and Courtney Schlisserman of Bloomberg report that in the last month, gasoline is down 6%, copper is down 14% and corn 26%.  These lower prices helped diminish some of the threat to the economy.   But consumers may not be ready to jump right in and spend, as unemployment is still rising and property values falling.  The survey did find a drop in consumers’ expectation of inflation for the next 12 months. 

Motor vehicles and parts helped manufacturing as The Federal Reserve reported that industrial production was up 0.2% in July, according to Martin Crutsinger of AP.  The increased auto activity was due to the resolution of a three-month strike at GM’s largest axle supplier.  Industrial production also did well due to exports.

Oil and other commodity prices continue to decline today, easing investor concerns that high energy prices would mean consumers would keep cutting their discretionary spending.

Some ETFs that are reacting to the new include:

  • PowerShares DB Agriculture Double Short ETN (AGA), up 6.5% in intra-day trading; down 5.3% for past 3-months
  • Rydex S&P Equal Weight Consumer Discretionary (RCD), up 6.4% in intra-day trading; down 11.2% year-to-date
  • ProShares UltraShort Oil & Gas (DUG), up 3.5% in intra-day trading; down 26.7% year-to-date

 Read the disclosure, as Tom Lydon is a board member of Rydex Investments.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.