XLE - Is a Commodities Super Cycle on the Way? | Benzinga
Source: Streetwise Reports 04/19/2024
Are we at the start of a commodities supercycle? We sat down with McAlinden Research to see what they had to say about the current state of commodities.
McAlinden Research Partners is a global provider of original investment strategy insights. The company's primary goal is to pinpoint profitable investment opportunities in their early stages and promptly inform their clients about these potential avenues for growth. Its founder, Joseph J. McAlinden, has over five decades of experience in the research and investment space.
With this in mind, we at Streetwise thought it would be good to sit down with some of the McAlinden team to get their take on what is currently going on in the commodities market.
First, we discussed current trends in the commodities space.
The McAlinden team told us, "In the stock market, we have a super bull market. That is not showing any signs of letting up." However, when it comes to commodities, the market is a mixed bag. They pointed out that some commodities, such as cocoa, have soared while others, like lumber, have been struggling.
AI and Y2K
In terms of a parallel, the McAlinden team said, "Market cycles don't repeat, but they do rhyme" and this reminded them a bit of the late 90s and early 2000s. People thought the world was going to end with Y2K, which led to high revenue in technology companies. However, once the world realized the sky wasn't falling, it led to a major correction.
The McAlinden team compared this to the current excitement surrounding AI. Eventually, the market will learn if AI has lived up to the hype.
Was it as scary as everyone predicted?
Maybe it won't be as advanced as we had previously thought, and when that happens, corrections will be made like with technology during Y2K.
A Geopolitically Influenced Market
Now, the McAlinden team explained that commodities are influenced by similar fears and movements in the world. They said, "Throughout history, you see that commodities are very heavily impacted, more impacted by geopolitics than equities."
For example, OPEC's oil embargoes significantly impacted the prices of oil in the 1970s, and this alliance of oil producers continues to have a profound impact on the price of energy commodities today.
"Now, within OPEC, or this OPEC+Syndicate, you have countries like Russia and Saudi Arabia, which are both countries within or right on the edge of war zones" the McAlinden team explained. "They depend . . . the free movement of trade that is subject to a lot of risk. And that is definitely pushing up some of the commodity prices, particularly in energy."
Still, the team made it a point to note that they don't believe we are at the beginning of a commodities super cycle yet, though "we may get there in the next couple of years."
Though the team pointed out that there has been a lot of chatter about "worst-case scenarios" that is not what has happened yet.
"There's been a lot of chances [where we thought] this could get really bad, this could spiral out of control, but for the most part, the state actors have been pretty rational in trying to avoid these cataclysmic events that might create something like a supercycle."
They continued, "I think that that has saved the world. [Still] there's only so many times you can really go right up to the edge of that risk cliff and not end up falling into it. And that's what you always have to be looking out for in commodities."
Still, the team made it a point to note that they don't believe we are at the beginning of a commodities super cycle yet, though "we may get there ...