The Beginning Of Donald Trump Influencing Futures Markets

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This morning, we got off a call with a talented investment manager with a program that trades almost 95% copper. Jaguar Investments Limited's managers mentioned to us that last week's move in copper was the biggest weekly move in 30 years - moving up more than 20% in the last couple of days (Disclaimer: Past performance is not necessarily indicative of future results). Copper is still below its 2011 highs, but this has to be one of the most surprising moves in the copper market for quite some time.

It shouldn't come as much of a surprise, though, that one of the most surprise-inducing elements of our time (remember that flash crash down on election night followed by a full recovery and mini flash crash up), president-elect Donald Trump, is the force behind the move. Not necessarily that he was elected, but that he promised (subscription required) to spend $10 trillion in infrastructure over the next 10 years, even if we might have to wait and see what happens with the metal market until Trump's supposed plan gets put into place. Via Financial Times:

"Timing wise, a US infrastructure stimulus is unlikely to kick in until the third quarter of 2017 and would in our view have the largest effect on steel, zinc, and nickel demand," said Goldman analyst Max Layton.

But Financial Times is suggesting that copper's move is a combination of Trump's priority to infrastructure and China's buying power:

As the renminbi has weakened retail investors in China have been looking for US dollar-linked assets to buy.

Copper has been one choice and steelmaking ingredient iron ore another. Coal had been a popular play until policymakers introduced curbs to cool prices and speculative buying over the past couple of weeks.

"We saw a lot of Chinese buying coming through - it was orderly until then and now it's become a little bit disorderly," said Michael Widmer, an analyst at Bank of America Merrill Lynch. "Views over a potential fiscal stimulus in the US just brought more buyers into the market and drove prices still higher."

There's no doubting copper is an early winner post-election, but only time will tell if copper will add to or fall off from this massive move based on the Trump administration's follow through on those infrastructure plans. One thing is for certain, though - these are just the type of directionally volatile moves systematic futures traders welcome and enjoy.