This commodity boom could quickly turn to bust – but a better opportunity awaits – by David Rosenberg (Financial Post – February 25, 2021)

China’s dominance, India’s rise and the shift towards green energy bodes well for some commodities

The recent run-up in commodity prices has unsurprisingly spurred discussions about a newly emerging commodity supercycle. It’s clear that we are in the midst of a supply-constraint led boom in this space, but this does not portend a long-term trend or decades-long supercycle ahead.

Indeed, any outlook of the sort that depends on a Roaring Twenties narrative, where global economies surge back to life once the pandemic is behind us, needs to be taken with a huge grain of salt.

However, we do see secular changes arising such as China’s increasing dominance and India’s rise (part of our “Go East” theme), as well as the global shift towards electrification creating opportunities for investors within a certain class of rising commodities.

Boom/bust cycles in commodities are historically pervasive events, typically lasting relatively short periods (three to four years), as can be gleaned from the Commodity Research Bureau index. Bear markets typically see the year-over-year negative trend bottom out at -15 per cent; the trend for bull markets peaks around 24 per cent.

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