Joseph Wang (known as the Fed guy) noted that the whole commodities complex collapsed as the Fed aggressively hiked rates.
Oil, grain, and iron ore are all down from their 2022 highs.
‘That tells me’, said Joseph, ‘that raising rates does work, in part because so much of the commodity complex is financialised’.
Because the paper commodities market is so much bigger than the physical market — and the paper market is sensitive to interest rates — you can tank the paper market by hiking rates, Joseph argues.
...this was exactly what I said, that paper market rules, not physical market and supply constraints in physical market does not alone dictate market direction, at least in the short term.
...it was what traders do that does, and demand destruction is currently a strong narrative.
