It’s been a while since commodities have been a topic of daily discussion. After years of very low inflation in the U.S. and globally, the spike in inflation in 2021 put them back on the table. Not well understood by many, and difficult to invest in most cases (typically through futures contracts), most of them are not included in portfolios for those reasons. But one characteristic that seems to be true about commodities is its cyclicality and the strength of the movements when they start. You can see below how the cycles are defined, and how the last 90 years have presented 3 full cycles of 30 years each, usually linked to inflation episodes and its subsequent abatement by the Fed. We might be in the early innings of a new cycle for commodities, with 15 years ahead of us, using historical averages as a guide, for the bull market portion of the cycle. If the cycle plays out like it has done in the past, what does that tell us about inflation? Are we going to have another episode of rising prices? Can we have a run in commodities without a surge in CPI?
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