Following the "flying" before gold and oil and gas, it was the turn of non-ferrous metals on Monday.
The non-ferrous metals index index in the previous period broke through the area of multiple highs since May 2023 and hit a new high.
The non-ferrous ETF (159980), which tracks this index, is one step closer to its highs in early 2023.
First of all, we need to do a knowledge popularization.
The non-ferrous metals index is a commodity futures index, and the components are as follows, all of which are generally referred to as base metals, which are sometimes jokingly called "base metals", which is obviously corresponding to "precious metals", which generally include gold, silver, platinum, palladium, etc.
Under the CSI stock index system, there is also a CSI nonferrous index, the concept of "non-ferrous" of this index includes base metals and precious metals, so you can see Shandong Gold and CICC Gold in its constituent stocks.
The connotation of commodity non-ferrous metals and non-ferrous stocks is very different, which cannot be mistaken.
Back to colored at the commodity level.
During the Qingming holiday, the global commodity market is still quite lively. The biggest change should be the late strike of base metals.
The chart below shows the 2024 performance of several major commodity futures ETFs traded in the U.S. stock market.
The orange PowerShares DB Commodity Tracking ETF, also known as DBC, is a composite ETF for the entire commodity futures and can be regarded as the overall benchmark for commodities.
The red PowerShares DB Agriculture Fund (DBA), an agricultural ETF, can be seen to be the strongest so far this year, which can be described as leading the way. Previously, the author bought soybean meal ETF, in fact, to a certain extent, to see if it would replicate the trend of DBA, but unfortunately, soybean meal is a marginal variety of agricultural products after all, and it cannot be compared with several mainstream ones.
As for the green PowerShares DB Oil Fund (DBO), which is oil and gas, it can be said to be the second strongest, starting with agricultural products, and by March it was slightly behind.
The yellow SPDR Gold Trust (GLD) has just begun to exert its strength in March, and it has gone in two waves, and it has begun to exert its strength in late March.
The blue PowerShares DB Base Metals Fund, which has been tepid and even lost money, only to burst into the red in April, turning around and making positive returns so far this year.
If the rise in gold is a hedge against the demand for currency over-issuance, and the rise in oil and gas is a geopolitical stimulus, then the entire mainstream commodity sector is rising, then people have to think once again about whether a wave of collective commodity calves will come?
Why are commodity futures prices climbing en masse?
Mu Yiling, who has been paying attention to resource stocks for a long time, has proposed the "real assets" market, and there is a recent push worth seeing: "The rise of physical goods, playing a good tailwind|." Livelihood Strategy.
Here's my roundup of this tweet with Kimi, just for reference:
The rise of real assets
Recent data shows that the manufacturing and housing markets in the U.S. are picking up, while the growth momentum in the services sector has slowed. This change means that real assets, such as commodities and physical commodities, may be more attractive than financial assets, such as stocks and bonds. This is because the recovery in manufacturing and real estate typically drives demand for upstream commodities, which in turn favors the performance of real assets.
Demand for resource goods and economic cycles
The report notes that demand for resource goods and performance can vary at different stages of economic growth and recession. During periods of slowing economic growth, investors tend to seek real assets as a safe-haven tool, while services and financial assets may perform better when the economy is strong.
Historical experience versus the current situation
By comparing historical data, the report finds that there is no signal of reversal of the distribution pattern of industrial chain profits to the upstream. This means that upstream industries such as mining and raw material production are likely to continue to maintain their profit advantages in the short term.
Investment advice
The report recommends investors to focus on physical assets, particularly copper, coal, oil, resource transportation (such as tankers and dry bulk carriers), precious metals, and aluminum and other minor metals (such as tungsten). In addition, the report also recommends focusing on the traditional manufacturing leaders in the CSI 300, as well as assets linked to physical workload, such as water, electricity, gas, railways, roads and banks.
Risk Warning
The report alerts investors to two potential risks: first, the Federal Reserve may raise interest rates more than expected, which could dampen commodity demand and push the dollar higher, which could negatively impact commodity prices;
However, there is still a risk warning.
When I talked about crude oil and gold in "Forward with Fire" last weekend, I said that I was chasing higher as a trend investor with the mentality of "facing fire".
The sword has no eyes, and so does the artillery fire.
So this kind of charge, there is a chance of death at any time. You must do a good job of buying a set or even cutting the meat of the real "speculative" psychological construction, in order to participate in commodity ETFs and commodity stock ETFs chasing higher.
After all, commodities are inherently cyclical, constantly circulating between highs and lows, and it is not easy to have the long-term investment value of benefiting from economic growth like the stock market.
The chart below is a weekly chart of the S&P GSCI over the past 20 years, which can clearly see the characteristics of volatility without increase in the context of flat global inflation.
Of course, commodities are not without a history of crazy unilateral gains.
The chart below shows the logarithmic axis of the same index from 1970 to date, and we can see that the craziest rise was the wave of high inflation from 1970 to 1980.
Indeed, the current great demand for commodity futures really comes from the expectation of a long-term bull market in commodities, which in addition to quantitative easing, also includes the expectation of coal hedging photovoltaic power generation demand in the new energy wave, and the expectation of new energy demand for copper wire. Of course, the so-called new round of long-term bull market, everything is really worth looking forward to when it comes to a real new high.
If you stand in this position, then compared with speculating on the recent rise, it may be more rational to moderately allocate commodities in the portfolio, such as according to the "all-weather simplified version" of Bridgewater Fund for ordinary investors, 7.5% gold + 7.5% commodity index, which is worth considering.