Leo Haviland provides clients with original, provocative, cutting-edge fundamental supply/demand and technical research on major financial marketplaces and trends. He also offers independent consulting and risk management advice.

Haviland’s expertise is macro. He focuses on the intertwining of equity, debt, currency, and commodity arenas, including the political players, regulatory approaches, social factors, and rhetoric that affect them. In a changing and dynamic global economy, Haviland’s mission remains constant – to give timely, value-added marketplace insights and foresights.

Leo Haviland has three decades of experience in the Wall Street trading environment. He has worked for Goldman Sachs, Sempra Energy Trading, and other institutions. In his research and sales career in stock, interest rate, foreign exchange, and commodity battlefields, he has dealt with numerous and diverse financial institutions and individuals. Haviland is a graduate of the University of Chicago (Phi Beta Kappa) and the Cornell Law School.


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The Rolling Stones sing in “All Down the Line”:
“We’ll be watching out for trouble, yeah
(All down the line)
And we’d better keep the motor running, yeah
(All down the line)”



Financial marketplace trends entangle in diverse fashions, which of course can change, and sometimes dramatically. Convergence and divergence (lead/lag) relationships between them can and do evolve, sometimes significantly. An increasing reversal of a given ongoing prior set of patterns between one or more key interest rate, stock, currency, and commodity marketplaces thus can attract growing attention and accelerate price moves in the new directions.


In general, since around the beginning of calendar 2022, as American and other key global government interest rates continued to rise (enlist the United States Treasury note as a benchmark), the S+P 500 (and other advanced nation and emerging marketplace stock playgrounds) declined. Growing fears regarding substantial and persistent consumer price (and other) inflation by the Federal Reserve and its central banking allies and the linked policy response of raising Federal Funds and similar rates played key roles in the yield climbs and stock price falls. Bear trends for other “search for yield” assets such as corporate bonds and United States dollar-denominated emerging marketplace corporate debt converged with those of the S+P 500 and emerging marketplace stocks. Commodities “in general” (“overall”) of course do not always trade “together” in the same direction around the same time as the S+P 500. Nevertheless, in broad brush terms since around late first quarter 2022, their downward price and time trends converged. A very strong US dollar encouraged the relationships of higher US Treasury yields, descending stock prices, and eroding prices for commodities “in general”.

However, the US 10 year note yield achieved an important high on 10/21/22 at 4.34 percent. Using the Federal Reserve Board’s nominal Broad Dollar Index as a weathervane, the dollar peaked at 128.6 on 9/27/22 and 10/19/22. The S+P 500 established a trough in its bear trend with 10/13/22’s 3492. Based on the S+P GSCI, commodities in general attained an important low on 9/28/22 at 591.8. Note the roughly similar times (and thus the convergence) of these marketplace turns, which thereafter reversed, at least temporarily, the preceding substantial trends.

What key changes in central bank policy and marketplace inflation yardsticks encouraged the recent slump in the UST 10 year yield, the depreciation in the US dollar, and the jump in the S+P 500 and the prices of related hunt for yield (adequate return) battlefields? First, various members of the Federal Reserve leadership hinted that future rate increases would slow in extent (be fifty basis points or less rather than 75bp). See the Financial Times summary of officials leaning that way (11/12-13/22, p2). The Fed probably will tolerate a brief recession to defeat inflation, but it (and of course the general public and politicians) likely would hate a severe one. In today’s international and intertwined economy, further substantial price falls (beneath recent lows) in the stock and corporate debt arenas (and other search for yield interest rate territories), and even greater weakness than has thus far appeared in home prices, plus a “too strong” US dollar, are a recipe for a fairly severe recession. Hence the Fed’s recent rhetorical murmurings aim to stabilize marketplaces (and encourage consumer and business confidence and spending) and avoid a substantial GDP drop.

Second, US consumer price inflation for October 2022 stood at “only” 7.7 percent year-on-year. This rate fell short of expectations for that month and declined from heights exceeding eight percent in the several preceding months. This sparked hopes that American (and maybe even global) inflation would continue to decline even more in the future, and that the Federal Reserve and other central bank guardians would engage in less fierce tightening trends.

Of course the Fed policy hints and US consumer inflation statistics do not stand apart from other variables. Might China ease its restrictive Covid-fighting policy, thus enabling the country’s GDP to expand more rapidly?

The trends for commodities in general (employ an index such as the broad S+P GSCI) and the petroleum complex in particular sometimes have diverged substantially for a while from that of the S+P 500. After all, petroleum, wheat, and base metals have their own supply/demand and inventory situations. The broad S+P GSCI stabilized in early autumn 2022 due to a determined effort by OPEC to rally petroleum prices via production cuts. And over the long run, the S+P 500 and commodities tend to trade together. OPEC+’s ability to successfully defend a Brent/North Sea crude oil price around 83 dollars per barrel (nearest futures continuation) depends substantially on interest rate and stock levels and trends, as well as the extent of US dollar strength.

The “too strong” US dollar during calendar 2022 encouraged price declines in assorted search for yield asset classes, including emerging marketplace stocks and debt instruments as well as commodities. The recent depreciation of the US dollar thus has interrelated with (confirmed) the price rallies in recent days in the S+P 500 and other marketplaces. Yet the Federal Reserve probably will remain sufficiently vigorous in comparison with other central banks in its fight against inflation, which should tend to keep the dollar strong, even if it stays beneath its recent high.


Investors in (and other owners of) stocks and other search for yield realms and their financial and media friends joyously applauded recent price rallies. However, to what extent will these bullish moves persist?

US consumer price and other key global inflation indicators remain very high relative to current central bank policy rates. Not only does the US CPI-U all items year-on-year percentage increase of 7.7 percent for October 2022 substantially exceed UST 10 year yields over four percent, but so does October 2022’s 6.3 percent year-on-year increase in the CPI-U less food and energy.

Imagine consumer price inflation staying at only 4.5 percent. To give investors a 50 basis point return relative to inflation, the UST should yield five percent. Thus the Fed will continue to push rates higher in its serious battle against inflation, and eventually the rising UST yield pattern probably will reappear, persisting until there are signs of much lower inflation or a notable recession.

Although marketplace history is not marketplace destiny, history reveals that significant climbs in key US interest rate signposts (such as the UST 10 year) tend to precede substantial falls in US stock benchmarks such as the S+P 500. Thus the S+P 500 probably will resume its decline, although it will be difficult for it to breach its October 2022 depth by much in the absence of a sustained global recession. So a return to rising UST rates, all else equal, probably will keep the dollar fairly powerful from the long run historic perspective, even though the dollar will find it challenging to exceed its recent highs by much (if at all) for very long.

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Critical Conditions in Financial Marketplaces (11-13-22)


“But, darlin’ can’t you see my signals turn from green to red
And with you I can see a traffic jam straight up ahead”. Jimi Hendrix, “Crosstown Traffic”



The broad real trade-weighted United States dollar’s December 2016 (at 103.3)/January 2017 (103.1) peak likely will remain intact (“TWD”; based on goods only; Federal Reserve Board, H.10; monthly average, March 1973=100). The high since then, December 2018’s crest at 102.0, stands slightly beneath this, as does May 2019’s 101.6 (June 2019 was 101.1). December 2018/May 2019’s plateau probably forms a double top in conjunction with December 2016/January 2017’s pinnacle. If the TWD breaks through the December 2016/January 2017 roadblock, it probably will not do so by much. The majestic long-running major bull charge in the dollar which commenced in July 2011 at 80.5 has reached the finish line, or soon will do so. 

Unlike the broad real trade-weighted dollar, the broad nominal trade-weighted dollar (goods only) has daily data. The broad nominal US dollar probably also formed twin peaks. It achieved an initial top on 12/28/16 (at 128.9) and 1/3/17 (128.8). The nominal TWD’s recent high, 5/31/19’s 129.6, edges only half of one percent over the 2016/17 high. 

The depreciation in the broad real trade-weighted dollar from its 103.3/103.1 elevation probably will be at least five percent, and very possibly ten percent. This retreat likely will last at least for several months. 


The broad real trade-weighted dollar’s level and patterns are relevant for and interrelate with those in key stock, interest rate, commodity, and real estate marketplaces. The extent to which and reasons why foreign exchange levels and trends (whether for the US dollar or any other currency) converge and diverge from (lead/lag) those in stock, interest rate, commodity, and other marketplaces is a matter of subjective perspective. Opinions differ. 

For related marketplace analysis, see essays such as: “Petroleum: Rolling and Tumbling” (6/10/19); “Wall Street Talking, Yield Hunting, and Running for Cover” (5/14/19); “Economic Growth Fears: Stock and Interest Rate Adventures” (4/2/19); “American Economic Growth: Cycles, Yield Spreads, and Stocks” (3/4/19); “Facing a Wall: Emerging US Dollar Weakness” (1/15/19); “American Housing: a Marketplace Weathervane” (12/4/18); “Twists, Turns, and Turmoil: US and Other Government Note Trends” (11/12/18); “Japan: Financial Archery, Shooting Arrows” (10/5/18); “Stock Marketplace Maneuvers: Convergence and Divergence” (9/4/18); “China at a Crossroads: Economic and Political Danger Signs” (8/5/18); “Shakin’ All Over: Marketplace Convergence and Divergence” (6/18/18); “History on Stage: Marketplace Scenes” (8/9/17). 


“We’ll be watching out for trouble, yeah (All down the line)
And we keep the motor running, yeah (All down the line)”, The Rolling Stones, “All Down the Line” 


What interrelated phenomena currently are sparking, or will tend to encourage, near term and long run US dollar weakness? 

Growing faith that America’s Federal Reserve Board not only will refrain from raising the Federal Funds rate anytime soon, but even may reduce it over the next several months, is a critical factor in the construction of the latest segment (December 2018 to the present) of the TWD’s resistance barrier. The Fed Chairman and other US central bank policemen speak of the need for “patience” on the rate increase front. The Fed eagerly promotes its “symmetric” two percent inflation objective (6/19/19 FOMC decision), which blows a horn that it may permit inflation to exceed (move symmetrically around) their revered two percent destination. 

By reducing the likelihood of near term boosts in the Federal Funds rate, and particularly by increasing the odds of lowering this signpost, the Fed gatekeeper thereby cuts the probability of yield increases for US government debt securities. The Fed thus makes the US dollar less appealing (less likely to appreciate further) in the perspective of many marketplace players. 

The Fed’s less aggressive rate scheme (at minimum, a pause in its “normalization” process) mitigates enthusiasm for the US dollar from those aiming to take advantage of interest rate yield differentials (as well as those hoping for appreciation in the value of other dollar-denominated assets such as American stocks or real estate relative to the foreign exchange value of the given home currency). This is despite negative yields in German, Japanese, and other government debt securities. Capital flows into the dollar may slow, or even reverse to some extent. 

The yield for the US Treasury 10 year note, after topping around 3.25 percent in early October 2018, has backtracked further in recent months. The UST resumed its drop from 4/17/19’s minor top at 2.62pc, nosediving from 5/28/19’s 2.32pc elevation. Since late June 2019, its yield has bounced around 2.00pc. 


The current United States Administration probably wants a weaker US dollar relative to its current elevation in order to stimulate the economy as the 2020 elections approach. President Trump claimed that the European Central Bank, by deliberately pushing down the Euro FX’s value against the dollar, has been unfair, making it easier for the Euro Area to compete against the US (New York Times, 6/19/19, ppA1, 9). Recall his complaints about China’s currency policies as well. The President’s repeated loud sirens that the Federal Reserve made mistakes by raising its policy rates, and instead should be lowering them also messages that the Administration wants the dollar to depreciate. 

Another consideration constructing a noteworthy broad real TWD top is mild, even if nervous, optimism that tariff battles and other aspects of trade wars between America and many of its key trading partners (especially China) will become less fierce. Both the United States and China increasingly are fearful regarding the ability of their nations to maintain adequate real GDP increases.

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US Dollar Travels- Crosstown Traffic (7-2-19)


“(All down the line.) We’ll be watching out for trouble, yeah.”
The Rolling Stones, “All Down the Line”



NYMEX natural gas (nearest futures continuation) probably will remain in a sideways trend between 2.40/2.50 and 3.20/3.45 over the next few months. However, United States natural gas inventories from the days coverage perspective (stocks relative to consumption) are much lower than the historical average. Suppose economic growth remains moderate and that commodity prices in general (and those in the petroleum complex in particular) do not collapse. This natural gas inventory situation, assuming it persists, makes it probable that the marketplace eventually will ascend over 3.20/3.45 toward major resistance around 4.00/4.10. The most likely achievement of a flight to 4.00/4.10 is around winter, whether that of winter 2018-19 or thereafter. A colder than normal winter (or even belief such will occur) boosts the chances of such a spike. If widespread expectations of upcoming massive US natural gas production increases are disappointed, that also likely will rally prices above 3.20/3.45 and toward 4.00/4.10.


Over the past year or two, the natural gas industry probably has shifted toward a lower level of desired (“appropriate”, “reasonable”, “normal”, “prudent”, “sufficient”) stock holding relative to historical averages. Why? One factor probably is faith that calendar 2018 (and subsequent) gas production will remain far over that of calendar 2017. So many players probably believe there “always (or almost always) will be enough gas around”. Another variable likely encouraging lower inventory in days coverage terms is the substantial expansion of America’s pipeline infrastructure. Thus it has (will) become easier to move sufficient gas to many locations where it is needed. Moreover, the growing share of renewables in total US electricity generation arguably to some extent reduces the amount of necessary natural gas inventories.

These structural changes in the US natural gas marketplace apparently have shifted the natural gas inventory management approach to more of a “just in time” (lower inventories) relative to a “just in case” (higher stockpiles) method.


However, the natural gas inventory situation nevertheless appears somewhat bullish. Even if the “reasonable” level of industry holdings of natural gas inventories has tumbled relative to historical benchmarks in days coverage by a few days, prospective levels for October 2018 and October 2019 nevertheless appear “low” relative to “normal” totals, particularly from the perspective of the winter stock draw period.

Arguably many natural gas marketplace participants are overly complacent regarding the availability of supplies, particularly in periods of high demand. Imagine a colder than normal winter. Emerging worries that available supply (whether in days coverage or arithmetical terms) is or may be tight can inspire heated scrambles to procure it.


Energy Information Administration (“EIA”) statistics indicate that calendar 2019 US liquefied natural gas (LNG) net exports will be substantial (notably higher than net LNG exports in 2017 and 2018). This net foreign demand for LNG will tend to tighten the US inventory situation. Also note that in calendar 2017 and 2018, America was a net importer of natural gas via pipeline; in calendar 2019, the US becomes a net exporter via pipeline.

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US Natural Gas- Waiting for Fireworks (7-3-18)

US NATURAL GAS: TRAVELING FORWARD © Leo Haviland June 13, 2016


Bob Dylan’s song “All Along the Watchtower” states:
“’There must be some way out of here,’ said the joker to the thief
“’There’s too much confusion, I can’t get no relief’”.



The United States natural gas (NYMEX nearest futures continuation basis) major bear trend that followed 2/24/14’s major peak at 6.493 ended with 3/4/16’s 1.611 bottom. For the next several months, however, natural gas likely will remain in a sideways pattern. The probable range for the United States natural gas marketplace remains a relatively broad avenue between major support at 1.60/1.90 and significant resistance at 3.10/3.45. This sideways outlook partly results from two currently contending marketplace stories.

For the near term, substantial natural gas oversupply exists, weighing on prices. Containment risks still loom for end of build season 2016. If noteworthy containment problems erupt, March 2016’s bottom may be attacked, even though current prices hover significantly above 1.60/1.90 and even if an assault on that support does not last for much time. What if a torrid summer 2016 dramatically reduces the stock build total and thus helps containment fears for end build season 2016 to disappear? Then prices likely will not revisit the 1.60/1.90 range, but instead will maintain their ascent toward 3.10/3.45.

The US natural gas supply/demand perspective over the so-called long run is moderately bullish. Assuming normal winter 2016-17 weather, moderate US economic growth, and no renewed collapse in the overall commodities complex (particularly petroleum), gas prices probably will march higher.



Natural gas prices often travel substantially independently of both petroleum (and commodities “in general”) and so-called “international” or “financial” marketplaces and variables. Trend changes in NYMEX natural gas need not roughly coincide with one in the petroleum complex or commodities in general, or currency, stock, or interest rate playgrounds.

However, especially since mid-to-late June 2014 (NYMEX natural gas nearest futures interim high 6/16/14 at 4.886) and into calendar 2015 (gas interim top 5/19/15 at 3.105), bearish natural gas price movements intertwined with those in the petroleum complex (and commodities in general) and the bull move in the broad real trade-weighted US dollar. Such natural gas retreats to some extent paralleled slumps in emerging marketplace stocks. Note also the timing coincidence between May 2015’s natural gas top and the S+P 500’s 5/20/15 peak at 2135. In regard to the timing of the S+P 500’s May 2015 high, the nominal broad trade-weighted dollar (Federal Reserve, H.10, which has daily data) made an interim low at 112.8 on 5/15/15 before appreciating further.

The recent low in NYMEX natural gas nearest futures, 3/4/16’s 1.611, occurred fairly close in time to the first quarter 2016 peak in US dollar and an assortment of notable intertwined 1Q16 lows in other important marketplaces. The trend shifts (price reversals) in first quarter 2016 in various marketplaces assisted the upward move in natural gas that emerged in early March 2016.

**The broad real trade-weighted United States dollar (monthly average) peaked at 101.2 in January 2016; the nominal TWD (which has daily data) established a top 1/20/16 at 126.2 (Federal Reserve, H.10).

**NYMEX crude oil (nearest futures continuation): bottoms $26.19 on 1/20/16 and $26.05 on 2/11/16.

**Broad Goldman Sachs Commodity Index (GSCI): 268 on 1/20/16. January 2016’s GSCI low occurred midway between the calendar month times of its 2008-09 bottom (12/24/08 at 308 and 2/19/09 at 306).

**S+P 500: Note the sharp rally from lows of 1812 on 1/20/16 and 1810 on 2/11/16.

**MXEF (MSCI emerging stock markets index; Morgan Stanley): 687 on 1/21/16, 708 on 2/12/16.

**Ten year US Treasury note: 1.53 percent yield low 2/11/16.


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US Natural Gas- Traveling Forward (6-13-16)