{"id":9360,"date":"2021-03-01T18:46:33","date_gmt":"2021-03-01T18:46:33","guid":{"rendered":"https:\/\/zackspcg.com\/blog\/?p=9360"},"modified":"2022-02-26T13:05:53","modified_gmt":"2022-02-26T13:05:53","slug":"commodity-prices-are-rising-is-it-a-supercycle","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/commodity-prices-are-rising-is-it-a-supercycle\/","title":{"rendered":"Commodity Prices are Rising&#8211;Is It a Supercycle?"},"content":{"rendered":"\n<p>Broad equity\nmarkets have rebounded strongly from last year\u2019s pandemic-induced recession,\nbut they\u2019re not the only asset class seeing strong gains.<sup>1<\/sup><\/p>\n\n\n\n<p>Commodities\nare on the upswing, too. <\/p>\n\n\n\n<p>As of last week, the Bloomberg Commodity Spot Index was up\nover 60% from the pandemic lows touched last March, and even still, many\nindividual commodities have not climbed back up to pre-pandemic prices.<sup>2<\/sup>\nAs you can see in the series of charts below, everything from copper, to oil,\nto lumber is seeing upward price pressure:<\/p>\n\n\n\n<p><strong>Crude Oil Prices:\nWest Texas Intermediate (5 Years)<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/4_pic1-4-1024x395.png\" alt=\"\" class=\"wp-image-9361\"\/><figcaption> <strong><em>Source: Federal Reserve Bank of St. Louis<sup>3<\/sup><\/em><\/strong> <\/figcaption><\/figure>\n\n\n\n<p>__________________________________________________________________________<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2021_03_01&amp;content=stock_market_outlook_report\">Instead of Timing the Market, Focus on These Key Data Points<\/a><\/strong><\/p>\n\n\n\n<p>Looking at the performance in the equity markets\npre-pandemic versus right now is proof that it is impossible to time the\nmarket. Commodities are seeing upward prices now, but how long will this last? <\/p>\n\n\n\n<p>It\u2019s good to stay on top of the market, but not by making\nshort-term, emotional decisions. Instead, I recommend that you maintain a\ndiversified portfolio and focus on key data points that can positively impact\nyour long-term investments. <\/p>\n\n\n\n<p>To help you do this, I am offering all readers our\njust-released Stock Market Outlook report. This report contains some of our key\nforecasts to consider such as:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><em>S&amp;P\n500 earnings growth<\/em><\/li><li><em>Outlook\nfor underlying U.S. economy?<\/em><\/li><li><em>U.S.\nreturns expectations for 2021<\/em><\/li><li><em>What\nproduces 2021 optimism?&nbsp; <\/em><\/li><li><em>Is\nit time to buy U.S. stocks?<\/em><\/li><li><em>Update\non U.S. fiscal stimulus<\/em><\/li><li><em>And\nmuch more\u2026<\/em><\/li><\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!&nbsp;<br> <strong><br>IT\u2019S FREE.&nbsp;<a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2021_03_01&amp;content=stock_market_outlook_report\">Download the Just-Released March 2021 Stock Market Outlook<\/a><sup>4<\/sup><\/strong><\/p>\n\n\n\n<p>__________________________________________________________________________<\/p>\n\n\n\n<p><strong>Metals: Producer\nPrice Index (5 Years)<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/4_pic2-1-1024x395.png\" alt=\"\" class=\"wp-image-9362\"\/><figcaption> <strong><em>Source: Federal Reserve Bank of St. Louis<sup>5<\/sup><\/em><\/strong> <\/figcaption><\/figure>\n\n\n\n<p><strong>Lumber: Producer\nPrice Index (5 Years)<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/3_pic3-1024x395.png\" alt=\"\" class=\"wp-image-9363\"\/><figcaption> <strong><em>Source: Federal Reserve Bank of St. Louis<sup>6<\/sup><\/em><\/strong> <\/figcaption><\/figure>\n\n\n\n<p><strong>Copper Prices (1990 \u2013\nPresent)<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/2_pic4-1024x395.png\" alt=\"\" class=\"wp-image-9364\"\/><figcaption> <strong><em>Source: Federal Reserve Bank of St. Louis<sup>7<\/sup><\/em><\/strong> <\/figcaption><\/figure>\n\n\n\n<p>Explanations\nfor <em>why<\/em> commodities are seeing upward\nprice pressures are many. They range from increased demand coming off pandemic\nlows to the impact of extraordinary fiscal and monetary stimulus, to surging\ndemand for lithium and copper needed for electricity and electric vehicles, to governments\nposturing for big infrastructure spending plans, to the global economy at the\ncusp of another commodity supercycle. I have noticed the appearance of\n\u2018commodity supercycle\u2019 quite a bit of late, which makes me think people may be\nover-committing (and getting too optimistic) to the possibility. &nbsp;<\/p>\n\n\n\n<p>The reality of commodity price pressures could be because of\nnone of the above factors, or all of the above factors. My point is this:\ninvestors should avoid trying to forecast commodity cycles and prices too far\ninto the future. I agree the 2021 outlook for commodities, and by extension Materials\nand Industrials companies, is positive. But I don\u2019t think it makes sense to\nforecast too much further than that. <\/p>\n\n\n\n<p>Most economists and market historians would agree that there\nhave been four commodity supercycles in history, with the last one starting\naround the mid-1990s. Many readers may remember the powerful rise of Emerging\nMarkets and in particular, China, in the 2000s. Historic infrastructure\nbuild-outs across the developing world \u2013 and a weak U.S. dollar \u2013 helped drive\na significant portion of that supercycle, which peaked in 2008 and arguably ended\nsometime in the last decade (still being determined). <\/p>\n\n\n\n<p>We know the 2008 Global Financial Crisis gave way to middling\nglobal economic growth, and it also hurt the Emerging Market\u2019s ability to access\ndebt markets. Commodities suffered during this period, and more recently, trade\nwars and the global economic shutdown tied to the pandemic made it worse. Supercycle\nadvocates argue these events created a new bottom for commodities.<\/p>\n\n\n\n<p>Time will tell. In the meantime, for investors, I would\nargue it is not essential to know today whether we are entering a commodities\nsupercycle or not. Why try to make forecasts several years into the future, on\nfairly limited information? <\/p>\n\n\n\n<p>I would agree the massive liquidity event caused by the\npandemic \u2013 coupled with a likely resurgence of economic activity following a\nonce-in-a-generation pandemic \u2013 should drive demand nicely higher in the next\nyear. This should benefit commodities and the Energy sector in general, and I\nthink it makes sense to maintain portfolio exposure in these areas in 2021. Beyond\nthat, you\u2019ll have to ask me again this time next year. <\/p>\n\n\n\n<p><strong>Bottom Line for\nInvestors<\/strong><\/p>\n\n\n\n<p>Perhaps one of the more important takeaways from rising\ncommodity prices is a broader takeaway regarding inflation. I have written\nrecently about inflation as a consideration in 2021, and what it could mean for\ninterest rates and high valuation stocks. Recently, we\u2019ve seen Wal-Mart\nannounce a boost to $15\/hour minimum wage, lumber prices (as detailed above)\nrising as demand for homebuilding goes up, and rising consumer demand squeezing\nfactories. If anything, rising commodity prices are just another indicator pointing\nto inflationary pressures growing in the U.S. and global economy. <\/p>\n\n\n\n<p>Commodity prices are rising, but no one knows what the outcome will be a few months or years. The key is not to time the market or emotionally invest in it, but to focus on key data points and economic indicators that could impact your investments in the long-term. To help you do this, I am offering all readers our&nbsp;<strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2021_03_01&amp;content=stock_market_outlook_report\">Just-Released March 2021 Stock Market Outlook Report.&nbsp;<\/a><\/strong><\/p>\n\n\n\n<p>This report looks at several factors that are producing optimism right now and contains some of our key forecasts to consider such as:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><em>S&amp;P\n500 earnings growth<\/em><\/li><li><em>Outlook\nfor underlying U.S. economy?<\/em><\/li><li><em>U.S.\nreturns expectations for 2021<\/em><\/li><li><em>What\nproduces 2021 optimism?&nbsp; <\/em><\/li><li><em>Is\nit time to buy U.S. stocks?<\/em><\/li><li><em>Update\non U.S. fiscal stimulus<\/em><\/li><li><em>And\nmuch more\u2026<\/em><\/li><\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!<br><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Mitch looks at the upward trend of commodity prices and what that says about the overall economy<\/p>\n","protected":false},"author":3,"featured_media":8874,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[63,71],"tags":[],"class_list":["post-9360","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitch-on-the-markets","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9360","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=9360"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9360\/revisions"}],"predecessor-version":[{"id":10447,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9360\/revisions\/10447"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=9360"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=9360"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=9360"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}