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With agricultural prices soaring, metal prices reaching their highest in years and oil well above $ 50 a barrel, JPMorgan Chase & Co. is calling it: Commodities seem to have started a new one. multi-year earnings supercycle.
A long-term boom in the commodities complex looks likely, with Wall Street betting on a strong economic recovery from the pandemic and a hedge against inflation, JPMorgan analysts led by Marko Kolanovic said in a report on Wednesday. Prices can also rise as an “unintended consequence” of tackling climate change, which threatens to constrain oil supplies while stimulating demand for the metals needed to build renewable energy infrastructure, batteries and of electric vehicles, the bank said.
Everyone from Goldman Sachs Group Inc. to Bank of America Corp. passing through Ospraie Management LLC, calls for a commodity bull market as government stimulus kicks in and vaccines are rolled out around the world to fight the coronavirus. Optimism has already pushed bull hedge fund bets on commodities to their highest levels in a decade, which is a dramatic turnaround from last year when oil first fell below zero and that farmers were dumping their produce in the midst of supply chains and declining demand.
“We believe that the new rise in commodities, and in particular the cycle of oil recovery, has started,” JPMorgan analysts said in their note. “The wind on yields and inflation is turning.”
Commodities have seen four supercycles in the past 100 years – the last one peaking in 2008 after 12 years of expansion.
While it was driven by China’s economic surge, JPMorgan attributed the latest round to several factors, including a post-pandemic recovery, “ultra-soft” monetary and fiscal policies, a weak US dollar, high inflation. stronger and more aggressive environmental policies. the world.
Likewise, hedge funds haven’t been so bullish on commodities since the mid-2000s, when China stockpiled everything from copper to cotton, while crop failures and global export bans drove up food prices, ultimately toppling governments during the Arab Spring. The environment is now starting to look similar, with a large measure of commodity prices hitting their highest level in six years.
Corn and soybean prices have skyrocketed as China takes charge of U.S. crops. Copper hit an eight-year high amid growing optimism about a broader economic recovery. And oil has recovered strongly from the depths of the Covid-19 pandemic as the global supply glut diminishes.
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