2024-05-08 06:47:06 ET
Summary
- Grains like soybeans, corn, and wheat have the potential to rise by 35% relative to long-term Treasuries over the next 16 months.
- Grains have been oversold over the past two years but are now showing signs of momentum, making them a good hedge against potential inflation.
- The gold/grains price ratio suggests that grains prices are due to rise and outperform other commodities, and recent momentum indicators support this outlook.
- Soybeans are in backwardation and therefore SOYB will likely outperform CORN; wheat is in contango and thus WEAT will likely lag.
- This analysis is based on historical research on commodity prices going back 150 years.
In my Q2 market cycle update last month, I argued that the cycle—defined primarily as momentum in corporate earnings per share and cyclical commodities—was reigniting and that small caps and precious metals with industrial utilities (e.g., platinum and silver) were some good places to take advantage of such an upswing. I think grains—corn, wheat, and soybeans—should now be added to this list.
This is based primarily on their having been relatively oversold over the last two years and their having shown signs of real momentum in recent weeks. That is, they have limited downside potential because of their selloff during the downcycle and greater upside potential if the market cycle is reigniting.
Thus, they have the potential to make absolute gains, outperform other commodity classes, and outperform long-term Treasuries. This makes them a good hedge against a potential inflation upswing, as well....
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For further details see:
Grains ETFs Likely To Rise Into 2025