Value-oriented investors may wish to note that Commodities returns have been flat or negative in 7 of the past 10 periods (including YTD 2020). The current depressed field position coincides with a multi-decade high in money supply growth and a potentially protracted period of disruption in global supply chains going forward.
We continue to view both the opportunities and risks in 2021 as walking a tightrope between two elephants. Navigating the tightrope involves the need to carefully target an asset allocation that manages dual risks on either side. One elephant that can influence an investor’s balance is the potential for significant erosion of purchasing power.
First, our ongoing concerns about inflation seem to be materializing as recent consumer-oriented (CPI) and commercial-oriented (PPI) pricing measures indicate a resurgence across many industries and products. Barring any change in policy from global central banks and Congress, we expect this trend to continue for the foreseeable future.
Continuing our thinking from last summer, we view the current financial market landscape as a battle between two giant financial forces.
