Arion’s Heavy Metal 2021– Commodities in Charts30/01/2021
In this commodity wrap we decided
to let charts do the talking – looking back at last year’s moves as well as the
likely major factors influencing the sector over the year coming.
- 2020 returns
- Fiscal Stimulus / Infrastructure Spend
- Weaker USD
- Commodities relative to other asset classes
Commodities performance in 2020
Winners & Losers
- Chart shows big rally from Q32020
- Large underperformance of index funds driven by overweight exposure to oil (BCOM 30% / GSCI +60%)
Fiscal Stimulus / Infrastructure Spend
“The government should pay people to dig holes in the ground and then fill them up.” – John Maynard Keynes
|Country||Allocated Infrastructure Spend||Focus|
|USA||$2tn||Build back better scheme - clean energy & infrastructure plan|
|China||$1tn||Belt & Road initiative - the worlds largest infrastucture project|
|China||$2tn||New infrastucture project - focused on 5G & AI|
|UK||£600bn||£100bn over 2021 / £600bn over next 4 years|
|EU||€750bn||Green New Deal project - green infrastructure|
|Indonesia||$412bn||Focused on infrastructure decentralisation, running to 2024|
- According to Fitch Solutions, Global construction industry real growth will reach 4.1% y-o-y during 2021, the fastest annual growth rate seen in over 20 years, following a historic fall of -2.5% y-o-y during 2020. They expect the global construction industry value in 2021 to stand at a considerable $5.0tn
- Infrastructure project financing was down about 75% from 2019 due to the Covid pandemic. When combined with the macro environment post-covid, pent-up demand could mean the pandemic was a ‘black-swan’ moment for a protracted infrastructure boon
- US 5, 10
& 30 year breakeven inflation rates have all surpassed May 2019 highs and
are on course to continue the push after Fed chair, Jerome Powell, announced
last summer that the central bank would allow periods of higher inflation
A weaker USD
Asset Allocation…commodities cheap?
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