Commodities

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• The years circled in Red below all ended long phases of poor commodity returns.

• This model by research firm Goehring & Rozencwajg shows those same periods had historically low valuations for commodities.

• This chart, which I've shown before shows the Invesco DB Commodity Index relative performance vs. the S&P500.

• Commodities began to outperform with the weakness in the S&P500 in early 2020 and has been correcting ever since.

• That correction appears to be over.

• The previous three cycles of relative performance of stock vs. commodities have lasted roughly 20 years since 1920.

• This aligns with the fact that both monetary and fiscal policy in most developed nations has, in my view, reached a tipping point that will drive inflationary bursts for years to come.

• Today, we see most generalist portfolios are dramatically underinvested in resources and commodities. I expect that to change over the next couple of years.