A Commodity Super-Cycle Looks Underway

Equity markets continued their bullish tear, closing positive on the week and led by Russell +2.5% (IWM). This is being partially fueled by the prospects of the passing of a long-awaited stimulus package in tandem with the optimism from the COVID-19 vaccine rollout and seasonal (holiday) uplift.

However, the pending stimulus package in conjunction with the Government’s easy monetary policy is pushing the dollar down around the globe and creating some big macro trends.

  • Commodity prices are percolating, including softs, industrial metals (silver, copper, gold), and even crude oil. Massive spending from the Federal Government, along with the Federal Reserve’s recent announcement of extremely low rates, is helping to fuel this phase beginning anew.
  • Commercial Real Estate (VNQ) received negative long-term projections, according to a Bloomberg article this week, one of the fall outs from the coronavirus pandemic. Commercial real estate is still down at least 15% off the highs set in February, while homebuilders have done well as the work from home trend intensifies.
  • ESG and socially-conscious investing themes are gaining traction, especially among pension fund managers and large asset managers such as Blackrock (BLK). The DOL is considering such mandates, as well. Meanwhile, a shareholder revolt is underway for climate change, and companies like Exxon Mobile (XOM) are among the many early targets.
  • Country ETFs, a few of which are in a MG investment model, continued recent outperformance over the US markets, as the dollar weakness has been benefiting these developed and emerging countries worldwide.
  • Easy money continues to benefit speculators as IPOs had another huge performance week for “new economy” type companies that don’t yet have profits to show, yet their growth is drawing in investors (speculators) in record numbers.

The highlights of this week’s market action are as follows:

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