A New Commodity Bull Market Began April 2020

My “New Commodity Bull Market” presentation at the 34th annual World Outlook Financial Conference Feb. 5, 2021 was a follow-up to last year’s conference when I forecast a new commodity bull market was just-around-the-corner.

The slides for this year’s presentation are below—along with a few new charts and some editorial comment.

The main message of my presentation is that commodities began a new bull market in March/April of last year and that commodities are especially cheap relative to stocks and bonds.

However today is NOT the best time to buy commodities.

Reflation Trade Narrative

The “reflation trade” narrative that has caused stock markets to surge higher since early November has also caused commodity prices to soar–, for instance is up ~75% in just over 3 months.

CLE Daily Chart

CLE Daily Chart

I expect at least a “correction” to the current “reflation trade” and that will be the time to look for long-term buying opportunities in the commodity markets.

New Commodity Bull Market

Image

I think a new commodity bull market started in April 2020 after a brutal 9 year bear market that cut prices by >50%.

Continuous Commodity Index Quarterly Chart

Continuous Commodity Index Quarterly Chart

3 Major Commodity Bull Markets

3 Major Commodity Bull Markets
Continuous Commodity Index Semi Annual Chart

Continuous Commodity Index Semi Annual Chart

Intermarket Relationships

Intermarket Relationships
US Long Bond Yields

Inter-Market Relationships

falling for 40 years created a very bullish environment for the stock market and the real estate market.

S&P 500 Semi-Annual Chart

S&P 500 Semi-Annual Chart

S&P Index And CRB Commodity Index

S&P Index And CRB Commodity Index

Commodities outperformed the stock market during the inflationary 1970s. From 1981 to 2000 the stock market outperformed commodities. The CRB got revenge from 2000 to 2011 but since 2011 the has been the clear winner! I think commodities will outperform stocks over the next few years.

SPC5 Vs CRC5 50 Year Chart

SPC5 Vs CRC5 50 Year Chart

Commodities To Equities Ratio

Commodities To Equities Ratio

Financial Reasons
Financial Reasons For New Commodity Bull Market

Financial Reasons For New Commodity Bull Market
Commodities Vs Inflation Expectation

Commodities Vs Inflation Expectation

Supply-Demand Reasons
US Private Investment In Mining Exploration

US Private Investment In Mining Exploration

Energy Sector Capex Cycle

Energy Sector Capex Cycle

New Commodity Bull Market - China

New Commodity Bull Market – China

Ideal Conditions for a Sustained Commodity Bull Market

The 2020 World Outlook Financial Conference was Feb. 7 & 8—just 2 weeks before the stock market began a steep tumble into the March lows. I told my audience that I thought stocks were at risk of a correction, that I owned bonds and I set out my list of Ideal Conditions for the coming commodity bull market.

Ideal Conditions For Sustained Commodity Bull Market

Ideal Conditions For Sustained Commodity Bull Market

Several of my “Ideal Conditions” for a commodity bull market have developed over the past 12 months and commodities have had a sharp rally. I think the rally has much further to go, after a “correction” to the current “reflation trade.”

Since Last Years Conference

Since Last Years Conference

Capital flows into ESG Global Funds are accelerating and give us some idea of the growing impact (both positive and negative) that climate change policies will have on markets.

ESG Capital Inflow

ESG Capital Inflow

Since Last Years Conference

Since Last Years Conference

prices have jumped >50%, is up ~90% since year-ago lows on heavy buying from China.

Soybeans Monthly Chart

Soybeans Monthly Chart

How To Benefit From A Commodity Bull Market

How To Benefit From A Commodity Bull Market

prices have soared ~85% in the last 11 months on expectations that demand will outstrip supply in our new “electric” world.

Copper-Quarterly Chart

Copper-Quarterly Chart

prices have nearly quadrupled from last year’s lows on expectations that “battery” demand will outstrip supply.

Lithium Weekly Chart

Lithium Weekly Chart

What Should You Buy
What Should You Buy

In this chart the CRB Total Return is pink and the is blue.

CAD Monthly Chart

CAD Monthly Chart

Timing - When To Buy Commodities

Timing – When To Buy Commodities
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