Unlocking the Potential of Commodities: A New Bull Market Cycle Emerging
Commodities have been overlooked in recent years, with investors focusing on other asset classes. However, a shift is occurring, and now is the time to pay attention to commodities as they are poised for a comeback.
Analyzing historical seasonal patterns, there is a notable strength in commodities during the first half of the year. This seasonal trend is not just based on numbers but reflects real-world changes in supply and demand dynamics.
Various indicators point towards a bullish case for commodities. Valuations are attractive, technicals are improving, intermarket indicators are supportive, and the demand outlook is positive. Additionally, supply growth is limited, further supporting the potential for a new multi-year upcycle.
Even if you are not directly investing in commodities, it is essential to consider their impact on inflation. A surge in commodity prices could lead to upside risks in inflation, which has broader implications for monetary policy, bond yields, and financial markets.
In this context, a cautious approach towards equities is recommended due to overvaluation, while a cautiously optimistic view on bonds is suggested. However, a highly bullish stance on commodities is advised as a way to hedge against inflation and participate in the emerging bull market cycle.
Overall, it’s crucial to not overlook commodities as they could play a significant role in shaping investment strategies in the coming year. Keep an eye on this asset class as things could get very interesting.