With the FED having cut rates, commodities are starting too look quite
interesting again after having done nothing since 2022. Who knew a simple 25
bp rate cut could fuel the economy this much? I feel this market rally is
one of the most hated ones too in recent memory. Every day I'm hearing
investors being annoyed at the state of the market. They are clearly not
part of the speculators benefitting from this upwards momentum. Even
institutional investors that have clearly been sidelined are flocking to the
TV stations to talk about recession risk and we're in a bubble, etc... We'll
just keep following what prices are doing for now.
Take a look below at the iPath Bloomberg Commodity Index chart below. After
quite the move during the covid era, it's done nothing but move sideways.
However, it's slowly waking back up after the FED made doing business just
slight a bit cheaper.
Now, it wouldn't be that special if it wasn't being confirmed by other
assets. Take a look at the relationship of commodities vs 7-10 yr US
treasury bonds. This ratio is just quite clearly signalling that inflation
will likely continue to rise. This is most likely coming from an increase in
economic activity that's why we're seeing commodity prices coming out of
their slumber.
Also, take a look at the price of palladium and aluminum below. Wouldn't you
say that placing a few glances towards the companies active in the mining or
other commodity sectors is worthwhile? Gold, silver, and the miners have
done extremely well lately and now that the FED has signaled further rate
cuts, those industrial metals might take the lead soon.
So, what do you think? Time to start positioning for new uptrends in the
commodities?
Let me know!