I just finished reading an article written by David Kelly, chief global strategist at JP Morgan Asset Management. In the article, Dr. Kelly shares his thoughts on what he describes as “the delicate health of the economic expansion.”
Dr. Kelly estimates that gross domestic production may be viewed as stagnant based on GDP numbers due out this Wednesday. Data on GDP and personal income and outlays are scheduled for release by the U.S. Bureau of Economic Analysis at 8:30 am and 10:00 am, respectively, on 30 April.
While I would not call his estimates on inflation as bleak, he does not paint the rosiest picture on changes in consumer prices. He expects an increase in consumer price levels during the second quarter of 2025 due to pressures from tariffs offsetting weakness in hotel rates, energy prices, and airline fares. He expects year-over-year inflation as registered by the Consumer Price Index to be closer to four percent by the third quarter 2025.
Four percent far exceeds the goals for inflation set by the Board of Governors of the Federal Reserve System. Their current goal for increases in consumer price levels is two percent. While 12 USC 225(a) describes the Federal Reserve’s oft cited “dual mandate” of stable prices and maximum employment (which also includes a mandate of moderate long-term interest rates), the statute does not specify a target for prices, employment, or interest rates.
A bunch of congressmen writing legislation that specifies price, employment, or interest rate targets would be scary, indeed.
While reading Dr. Kelly’s article the issue of proficiency on the part of a financial advisor raised its head. Too often I hear market commenters discuss the Fed, treating the American central banking system as the catch-all for everything ill with the economy. Given its role as monetizer of government debt and, within the last 17 years, a major source of market liquidity, I can understand why market gurus make quick reference to the Fed.
There are, however, other moving parts to the economy and you as the trader should expect your commodity trading advisor to be proficient in her knowledge of those moving parts. For example, a commodity trading advisor is required to be registered with the CFTC via the National Futures Association. A commodity trading advisor is defined as:
” … an individual or organization that, for compensation or profit, advises others, directly or indirectly, as to the value of or the advisability of trading futures contracts, options on futures, retail off-exchange forex contracts or swaps.”
With certain exceptions, a person seeking approval as a commodity trading advisor must pass a Series 3 examination and register with the National Futures Association. The examination tests the proficiency of the candidate in a number of areas including monetary policy and analysis of interest rates and yields. A commodity trading advisor, in my opinion, should be able to reconcile your expectations and outlook as a trader with her knowledge of and proficiency in matters of the economy.
Telling you, the trader, that the Fed might or might not raise interbank overnight rates because CNBC or Bloomberg says so should not be enough. The subject matters that an advisor should be proficient in looks like a curriculum for a PhD student. You, the trader, should be able to push back on your advisor’s assessments.
As I observed in an earlier blog post, I believe that traders are entering into a DIY era when it comes to investing and trading. You should have a good team around you and that includes your trading advisor. You don’t need a philosophy degree to question the information you receive from your advisor, just an open mind and critical thinking when observing the trading landscape.
Alton Drew
28 April 2025
Disclaimer: The above post is provided as a thought exercise and does not constitute legal or trading advice. Please consult a professional trading advisor before executing a trade. Reach out to me with questions you have concerning the legal and regulatory environment surrounding trading. I am at altondrew@altondrew.com.
Lawyers Write the Bets. Bankers Sell the Bets. 