Research house Variant Perceptions writes:
We are on the cusp of a new commodity supercycle.
There are 3 big secular drivers of this supercycle:
a) The long era of monetary-policy dominance is over, leading to a heightening of inflation risks not seen since the 1960s
b) Investors are deeply underweight and will need real assets such as commodities as a hedge against inflation
c) Commodities are generationally cheap, both compared to themselves and to other assets
Moreover:
a) There is a seismic shift away from monetary-policy dominance towards fiscal-policy dominance
b) The private sector’s preference for saving – despite years of ever easier monetary policy – has meant the government needs to spend to make up the shortfall, supported by central banks’ government bond buying
c) The pandemic has only magnified existing trends. We are heading towards the fusion of monetary and fiscal policy
d) This has profound implications for investing and portfolio construction
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