We believe commodities as a whole look very attractive right now due to a number of factors.
I believe we’ll see demand from China surge in the coming months and years as the country comes out of the pandemic as the only major economy to expand in 2020. Last Thursday, February 18, Chinese stocks, as measured by the CSI 300 Index, hit a new all-time high, exceeding the previous record set in October 2007.
That was near the end of the last commodities supercycle. One highly regarded quant analyst believes we may be on the verge of the next one.
In a note to clients this week, JPMorgan’s Marko Kolanovic wrote that he thinks commodities have finally turned after a 12-year down cycle. The potential drivers of a secular bull market, says Kolanovic, include the end of the pandemic and reopening of economies, fiscal stimulus, end of the U.S.-China trade war, ultraloose monetary policies and increased and “tolerated” inflation.
He also notes ESG investors, or those who put special emphasis on environmental, social and corporate governance concerns. President Joe Biden seeks to go big on an infrastructure package that’s expected to favor renewables, which is supportive of metals, electric vehicles (EVs) and batteries.
Kolanovic’s outlook is shared by many other analysts and investors, including Goldman Sach’s Jeff Currie, head of commodity research. In a recent interview with S&P Global Platts, Currie (who called the previous supercycle) said he’s bullish on oil and believes copper is likely already in a secular up cycle. “I want to be long oil and hang on for the ride,” he said in the February 5 interview.
(This article was written by Frank Holmes, CEO of U.S. Global Investors)