Perspective: Morning Commentary for January 31

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

January 31 – Tariffs are the talk on Wall Street to close out the week and the month, with President Trump’s looming target date of applying hefty punitive charges on imports coming from Canada, Mexico, and China coming tomorrow unless those countries agree to his terms for stopping the flow of illegal migration and drugs across U.S. borders, and he’s now adding trade deficits to the discussion as well. Stuck in the middle of this, as if an interruption of sorts, is this morning’s inflation data release. The VIX is trading near 15 this morning, after falling to its lowest level in a week, while the dollar index firmed to trade near 108.3. Yields on 10-year Treasuries are trading 4.52%, rallying and then falling on this morning’s inflation data, while yields on 2-year Treasuries are trading near 4.21%. Crude oil prices are mixed, while the grain and oilseed markets came under active selling pressure overnight.

Personal income rose 0.4% on the month in December, matching analyst expectations, but up from 0.3% growth in November. Personal expenditures rose 0.7% month-on-month in December, up from expectations of 0.5% growth, and up from 0.4% the previous month. That fits with yesterday’s GDP report, showing a notable increase in consumer spending in the fourth quarter as consumer sentiment rallied following the election, at least until it pulled back somewhat in January. The headline PCE price index rose 0.3% on the month in January, again matching analyst expectations, but that was also up from a 0.1% rise in November. The PCE price index rose 2.6% year-on-year in December, matching expectations, but again up from 2.4% the previous month. The core PCE price index that excludes the more volatile food and energy sectors rose 0.2% on the month in December. You guessed it – that matched expectations, but it was still up from 0.1% the previous month. The core PCE price index rose 2.8% year-on-year in December, matching expectations, and matching the previous month’s pace.

So, consumer spending was strong in December – stronger than expected. Inflation increased in December, but the increased pace was expected. Other data showed that employment costs rose 0.9% over the previous quarter in the fourth quarter of 2024, also matching expectations. That put wage inflation at 3.8% year-on-year, down slightly from 3.9% in the third quarter of the year. Inflation pressures are increasing modestly. The question before the Fed is whether that is an aberration in an otherwise down trending pattern or is it indicative of a more structural problem. There are valid arguments in both directions, although my bias is the latter.

Tariff fears, or merely end-of-the-month book squaring. The overnight selloff in the grain and oilseeds had some of both, but the tariff fears were a significant part of the weakness to close out the month of January. Public policy is a lot like making sausage. It’s never as clean and nice looking as we would want it to be. Trade policy becomes even messier, as it blends together negotiating what is in the best interest of each nation involved with the strong personalities of the leaders that helped get them into their positions of leadership. There’s no arguing that President Trump likes to use his office as a bully pulpit to get things done. Sometimes that works well, and sometimes it creates chaos. But he also likes to use that chaos to reach his objectives. The chaos is part of his strategy.

Justin Trudeau has been Prime Minister of Canada since 2015. Its economy is struggling, and his approval numbers are low. That puts him at a disadvantage in negotiating with Trump. Trump treated him as “governor of the 51^st state” to leverage that weakness. Claudia Sheinbaum Pardo became the first woman to serve as president of Mexico in October of 2024. The cartels hold significant power in Mexico. Her role in that will be debated, but regardless, she cannot look weak in front of her people when confronting Trump. Yet, she like Trudeau knows that her country cannot afford a trade war with the US. As such, we need to separate out what happens behind the scenes versus the sound bites that are provided to the media. Sheinbaum stated yesterday that she didn’t think that Trump will follow through with the tariffs, after he backed down from his threat to Colombia last weekend. So, does that mean that she doubts his seriousness, or that she plans to quietly meet Trump’s demands like Colombia’s president did? Unfortunately, her public statement of doubt may lead Trump to at least temporarily enforce the tariffs regardless of what’s happening behind the scenes. Reuters released a list of products that Mexico is considering applying varying levels of retaliatory tariffs to if Trump implements his tariffs. That list included pork products, cheese, apples, grapes, potatoes, cranberries, Bourbon whisky, manufactured steel, and aluminum, but it did not include auto parts, corn, soybeans, wheat, etc. that would hurt its economy deeply. Canada will likely take a similar approach, but it is keeping its list secret for now. Trump as well said he is considering leaving some products off his tariff hit list that would hurt the U.S. economy, such as Canadian crude oil. The bottom line is that the commodity markets will face headline risk through the day today, and likely through the weekend when the markets are closed. As such, grain and oilseed traders leaned to the short side overnight as they hedged their risk exposure.

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI . StoneX is a trading name of StoneX Financial Ltd (“SFL”). SFL is registered in England and Wales, Company No. 5616586. SFL is authorized and regulated by the Financial Conduct Authority [FRN 446717] to provide to professional and eligible customers including: arrangement, execution and, where required, clearing derivative transactions in exchange traded futures and options. SFL is also authorised to engage in the arrangement and execution of transactions in certain OTC products, certain securities trading, precious metals trading and payment services to eligible customers. SFL is authorised & regulated by the Financial Conduct Authority under the Payment Services Regulations 2017 for the provision of payment services. SFL is a category 1 ring-dealing member of the London Metal Exchange. In addition SFL also engages in other physically delivered commodities business and other general business activities which are unregulated and not required to be authorised by the Financial Conduct Authority. StoneX Group Inc. acts as agent for SFL in New York with respect to its payments services business. StoneX APAC Pte. Ltd. acts as agent for SFL in Singapore with respect to its payments services business. ‘StoneX’ is the trade name used by StoneX Group Inc. and all its associated entities and subsidiaries.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. Past performance of any futures or option is not indicative of future success. Indicators are not a trading system and are not published as a specific trade recommendation. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2025 StoneX Group Inc. All Rights Reserved.

Discover more insights

Our subscribers have access to comprehensive market analysis from StoneX spanning commodities, equities, currencies and more.

Explore subscriptions

StoneX: We open markets

Our market expertise, advanced platforms, global reach, culture of full transparency and commitment to our clients’ success all set us apart in the financial marketplace.

Globality

With access to 40+ derivatives exchanges, 180+ foreign exchange markets, nearly every global securities marketplace and numerous bi-lateral liquidity venues, StoneX’s digital network and deep relationships can take clients anywhere they want to go.
Transparency

As a publicly traded company meeting the highest standards of regulatory compliance in the markets we serve; our financials and record of accomplishment are matters of public record. StoneX’s commitment to “doing the right thing over the easy thing” sets us apart in the industry and helps us build respect, client trust and new partnerships.
Expertise

From our proprietary Market Intelligence platform, to “boots on the ground” expertise from award-winning traders and professionals, we connect our clients directly to actionable insights they can use to make more informed decisions and achieve their goals in the global markets.

Tell us about yourself. Are you a:

First name

Last name

Company

Country

Province/Region

By submitting this form, you are sending StoneX Group Inc. and its subsidiaries your personal information to be used for marketing purposes. View our Privacy notice to learn more.

First name

Last name

Company

Account number

Account holder name (if different from above)

By submitting this form, you are sending StoneX Group Inc. and its subsidiaries your personal information to be used for marketing purposes. View our Privacy notice to learn more.

Perspective: Morning Commentary for January 31

Discover more insights

Top Third Closing Audio Comments

Top Third Opening Audio Comments

Grains & Oilseeds Podcast | How Far Can Corn Rally?